Question

a) What is the value of a 6-year, 7.7% coupon, $1,000 face value bond that pays quarterly coupons, if its yield to maturity is 2.8%? Round to the nearest cent.

b) You own a 17-year, 3.8% annual coupon bond with $1,000 face value. If the yield to maturity is 8.5%, what percentage of the bond's value comes from the present value of coupon payments? Answer in percent, rounded to one decimal place.

c) Your company is undertaking a new investment opportunity and you would like to issue bonds to fund the project. Each bond will be a 7-year zero-coupon bond with a $1,000 face value. If the bonds are to yield 6.2%, how many of these bonds will the company need to issue today in order to raise $53 million? Round to the nearest whole number.

Answer 1

a)