Question

1. AAA, Inc. currently has an issue of bonds outstanding that will mature in 31 years. The bonds have a face value of $1,000 and a stated annual coupon rate of 20.0% with annual coupon payments. The bond is currently selling for $890. The bonds may be called in 4 years for 120.0% of the par value ($1200). What is your expected quoted annual rate of return if you buy the bonds and hold them until maturity?

2. BBB, Inc. bonds have a par value of $1,000, a 33-year maturity, and an annual coupon rate of 12.0% with annual coupon payments. The bonds are currently selling for $923. The bonds may be called in 4 years for 112.0% of par ($1120). What quoted annual rate of return do you expect to earn if you buy the bonds and company calls them when possible?

3. Define and explain the following terms(in own words):

Secured versus unsecured debt:

Senior versus subordinated debt:

4. Compare 30-year bond to a 5-year bond all else equal. Which one is more sensitive to interest rate changes. Why? Please explain.

Answer #1

XZYY, Inc. currently has an issue of bonds outstanding that will
mature in 33 years. The bonds have a face value of $1,000 and a
stated annual coupon rate of 13.0% with annual coupon payments. The
bond is currently selling for $977. The bonds may be called in 5
years for 113.0% of the par value. What is your expected quoted
annual rate of return if you buy the bonds and hold them until
maturity?
Question 13 options:
13.31%
15.60%...

XZYY, Inc. currently has an issue of bonds outstanding that will
mature in 23 years. The bonds have a face value of $1,000 and a
stated annual coupon rate of 10% with semi-annual coupon payments.
The bond is currently selling for $1151. The bonds may be called in
5 years for 112% of par value. What is the quoted annual
yield-to-maturity for these bonds?
8.89%
4.25%
8.50%
8.24%
7.81%

(36) Yes They May, Inc. has a bond issue outstanding with a
$1,000 par value and a maturity of 26 years. The bonds have an
annual coupon rate of 18.0% with quarterly coupon payments. The
current market price for the bonds is $875. The bonds may be called
in 5 years for 118.0% of par. What is the quoted annual
yield-to-maturity for the bonds?
5.15%
20.59%
21.70%
24.33%
39.14%

Mouse, Inc.’s outstanding bonds have a $1,000 par value, and
they mature in 5 years. Their yield to maturity in 9%, based on
semiannual payments, and the current market price is $853.61. What
is the bond’s annual coupon rate?

Company A has a debt issue outstanding with a 6% coupon rate and
10 years to maturity. The debt is BB+ rated and is trading at
$913.21 per bond. At this price, the bonds have a yield to maturity
of 7.25%. The 10-year Treasury bond yield is 4.25%. What is Company
A's pretax cost of debt?
Company B has a publicly-traded bond issue of $400 million
outstanding. These bonds have a 5.25% annual coupon rate, 20 years
remaining to maturity,...

Bonita Limited has bonds outstanding that will mature in 6
years. The bonds have a face value of $1,000. The bonds pay
interest semi-annually and have a coupon rate of 4.6 percent. If
the bonds are currently selling at $899.68.
What is the yield to maturity that an investor who buys them
today can expect to earn? (Round answer to 1 decimal
place, e.g. 5.2%.)
Yield to maturity% __________________
What is the effective annual yield? (Round answer to
2 decimal...

Swanson, Inc. bonds have a 13% coupon rate with semi-annual coupon
payments. They have 18 years to maturity and a par value of $1,000.
Your required rate of return is 11%. Suppose you decide to buy the
bond, and immediately afterwards interest rates increase by 0.5%.
How much value has the bond gained or lost?

Greshak Corp. currently has bonds outstanding that trade for
$1,080.60 in the market. Each bond has a $1,000 par value, an
annual coupon rate of 8.50% (paid semiannually), and have 18 years
remaining to maturity. In the market, this bond currently has a
7.70% nominal yield to maturity, but it can be called in 6 years at
a price of $1,060. What is the bond's EXACT Yield to Call (YTC)?
Select one: a. 7.61% b. 3.80% c. 4.26% d. 10.60%...

6. Davis Inc.'s bonds currently sell for $800 and have a par
value of $1,000. They pay a $100 annual coupon and have a 20-year
maturity, but they can be called in 5 years at $1,200. What is
their yield to maturity (YTM)?
7. Davis Inc.'s bonds currently sell for $800 and have a par
value of $1,000. They pay a $60 annual coupon and have a 20-year
maturity, but they can be called in 5 years at $1,200. What...

Answer the following questions
Al Safa Inc. plans to issue new bonds to finance its new project.
In its efforts to price the issue, Al-Safa has identified a company
of similar risk with an outstanding bond issue that has an 8
percent coupon rate having a maturity of ten years. This firm's
bonds are currently selling for $1,091.96. If interest is paid
annually for both bonds, what must the coupon rate of the new bonds
be in order for the...

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