Question

1. Omega Enterprises has an 8% coupon bond with exactly 16 years to maturity. Interest is paid semi-annually. The bond is priced at $1,125 per $1,000 of face value. a.) What is the yield to maturity on this bond? b.)An investor purchased the bond at $1,125 and sold it 5 years later at a price of $1,023. What was the investor’s return. (Hint: calculate the YTM as in a) above but use the sale price as the future value.

2. Alpha Corporation has a bond outstanding with the following characteristics:

Par Value $1,000

Years to maturity 9

Yield to maturity 6.2%

Coupon payments Semi-annual

Coupon rate 6%

What is the bond’s price?

3. A zero coupon bond has a maturity date exactly 16 years away. It currently sells at a price to yield 4.5%. The yield to maturity on the bond suddenly increases to 5.1%. Calculate a.) its price before the rate increase, b.) its price after the rate increase, and c.) the percentage change?

4. Delta Corporation has a 15 year 5% coupon bond with par value of $1,000 and a price of $1,088.37. The company wants to issue a new 15 year coupon bond at par. What coupon rate does the company need to offer? (Interest is payable semiannually on both bonds. Assume that for both bonds, the next coupon payment is exactly 6 months away.)

5. A 30 year 6% coupon bond has annual payments and a yield to maturity of 4.55. The bond has a par value of $1,000. a.)What is the value of the bond? b.) What is the present value of the 30 coupon payments? c.) What is the present value of the principal payment? (a is equal to b +c)

6. A convertible bond with a par value of $1,000 has a conversion ratio of 40. The bond is currently approaching maturity and the company’s stock price is $29.50. a.) Would you convert? b.) Why?

Answer #1

1) a. Bond Price can be calculated using I/Y function on a calculator

N = 16 x 2 = 32, PMT = 8% x 1000 / 2 = 40, PV = -1125, FV = 1000

=> Compute I/Y = 3.36% (semi-annual)

YTM = 3.36% x 2 = 6.71%

b. N = 5 x 2 = 10, PMT = 40, PV = -1125, FV = 1023

=> Compute I/Y = 2.76%

Annualized returns = 2.76% x 2 = 5.51%

2) Bond Price can be calculated using PV function

N = 9 x 2 = 18, I/Y = 6.2%/2, PMT = 6% x 1000 / 2 = 30, FV = 1000

=> Compute PV = $986.36

3) a. Current Price, PV = FV / (1 + r)^n = 1,000 / (1 + 4.5%)^16 = $494.47

b. New Price PV = FV / (1 + r)^n = 1,000 / (1 + 5.1%)^16 = $451.19

c. % Change = 451.19 / 494.47 - 1 = -8.75%

Stealers Wheel Software has 8 percent coupon bond on the market
with 10 years to maturity, and the par value of $1,000. The bonds
make semi-annual coupon payments and currently sell for $980. What
is the YTM? If the bond with the same maturity and similar risk
pays 6% annual coupon (pays semi-annually), what should be the
market price of the second bond?

CraMerica has 8% coupon bond issue with 8 years to maturity.
Each of these bonds make semi-annual interest payments. These bonds
have a yield to maturity of 10%. Suddenly, the yield to maturity on
these bonds fall to 8%. What is the percentage change in the price
of these bonds. Assume a par value of $1,000. Enter your answer to
two decimal plances with no percentage sign. That is, like this:
13.61

CraMerica has 8% coupon bond issue with 8 years to maturity.
Each of these bonds make semi-annual interest payments. These bonds
have a yield to maturity of 10%. Suddenly, the yield to maturity on
these bonds fall to 8%. What is the percentage change in the price
of these bonds. Assume a par value of $1,000. Enter your answer to
two decimal plances with no percentage sign. That is, like this:
13.61

1. A 9-year zero coupon bond has a yield to maturity of
11.8 percent, and a par value of $1,000. What is the
price of the bond?
2. A 7-year bond has a 8 percent coupon rate with the interest
paid in semi annual payments. The yield to maturity of
the bond is 2.3 percent, and a face value of
$1,000. What is the price of the bond?
3. A 12-year bond has a 9 percent annual coupon, a yield to
maturity of...

A.Bond Prices A $1,000 par bond that pays
interest semiannually has a quoted coupon rate of 7%, a promised
yield to maturity of 7.7% and exactly 6 years to maturity. What is
the bond's current value?
B.Bond Prices A $1,000 par bond that pays
interest semiannually has a quoted coupon rate of 5%, a promised
yield to maturity of 5.7% and exactly 11 years to maturity. The
present value of the coupon stream represents ______ of the total
bond's value....

a
20 year, 8% coupon rate, $1,000 par bond that pays interest
semi-annually bought five years ago for $850. this bond is
currently sold for 950. what is the yield on this bond?
a.12.23%
b.11.75%
c.12.13%
d.11.23%
an increase in interest rates will lead to an increase in the
value of outstanding bonds.
a. true
b. false
a bond will sell ____ when coupon rate is less than yield to
maturity, ______ when coupon rate exceeds yield to maturity, and...

8. A bond with 20 years to maturity is selling for $1,250 and
has a yield to maturity of 13.5 percent. If this bond pays its
coupon payments semi-annually and its par value is $1,000, what is
the bond’s annual coupon rate?
Group of answer choices
A. 18.13 percent
B.17.14 percent
C. 17.42 percent
D. 8.57 percent

A bond has 16 years left to maturity. With semi-annual coupon of
$25 (paid twice a year). The yield to maturity (the rate for equal
duration and risk bonds is now going for) is 4.5%. Show steps
A. What is the current price of the bond?
B. What is the Macauley Duration of the bond?
C. What is the Modified Duration of the bond?

a) Johnson Motors’ bonds have 10 years remaining to maturity.
Coupon interest is paid annually, the bonds have a $1,000 par
value, and the coupon rate is 7 percent. The bonds have a yield to
maturity of 8 percent. What is the current market price of these
bonds?
b) BSW Corporation has a bond issue outstanding with an annual
coupon rate of 7 percent paid semiannually and four years remaining
until maturity. The par value of the bond is $1,000....

A 5 percent coupon bond has 20 years left to maturity and has a
price quote of 95 (quoted bond price is $950). The bond can be
called in five years and if called would generate a yield to call
of 8 percent. Compute the bond's current yield, yield to maturity
and call price. (Assume interest payments are paid semi-annually
and a par value of $1,000.)

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