Question

A corporate bond has a $1,000 face value and a 5 percent
coupon rate (annual payments) maturing in 3 years.

a. If the yield to maturity is 7%, what is the bond
price?

b. An investor believes an appropriate rate to discount the
future cash flow of the bond should be 6%, should the investor buy
or sell the bond? Discuss the reason(s).

Answer #1

a)

b)

**Bond should be purchased as required rate is less than
the yield to maturity.**

A 25-year maturity bond with face value of $1,000 makes annual
coupon payments and has a coupon rate of 8.1%. (Do not
round intermediate calculations. Enter your answers as a percent
rounded to 3 decimal places.)
a. What is the bond’s yield to maturity if the
bond is selling for $910?
b. What is the bond’s yield to maturity if the
bond is selling for $1,000?
c. What is the bond’s yield to maturity if the
bond is selling for...

A 20-year maturity bond with face value of $1,000 makes annual
coupon payments and has a coupon rate of 8.8%. (Do not round
intermediate calculations. Enter your answers as a percent rounded
to 3 decimal places.)
a. What is the bond’s yield to maturity if the bond is selling
for $980?
b. What is the bond’s yield to maturity if the bond is selling
for $1,000?
c. What is the bond’s yield to maturity if the bond is selling
for...

A $1,000 face value corporate bond with a 6.5 percent coupon
(paid semiannually) has 15 years left to maturity. It has had a
credit rating of BBB and a yield to maturity of 7.2 percent. The
firm has recently gotten into some trouble and the rating agency is
downgrading the bonds to BB. The new appropriate discount rate will
be 8.5 percent. What will be the change in the bond’s price in
dollars and percentage terms?

BOND TYPE: Corporate,
YIELD-TO-MATURITY: 5 percent
ANNUAL COUPON RATE: 5 percent
COUPON FREQUENCY: Semi - Annual
MATURITY DATE: Today’s Date with the year set to 4 years from
now. (i.e. If today is July 21, 2019, then it should be July 21,
2023)
PAR VALUE: $1000.00
QUANTITY: 1
SETTLEMENT DATE: Today's date (i.e. July 21, 2019).
Compute the price of this bond using the formula, the formula
that computes the present value of future cash flows of the bond,
using...

A bond with a face value of $1,000 has annual coupon payments of
$100 and was issued 10 years ago. The bond currently sells for
$1,000 and has 8 years remaining to maturity. This bond's
______________ must be 10%.
I. yield to maturity, II. coupon rate
a. Neither I not II
b. I only
c. I and II
d. II only

Last year Janet purchased a $1,000 face value corporate bond
with an 7% annual coupon rate and a 20-year maturity. At the time
of the purchase, it had an expected yield to maturity of 13.05%. If
Janet sold the bond today for $1,133.42, what rate of return would
she have earned for the past year?

A bond has a face value of $1,000, a coupon rate of 8%, and a
maturity of 10 years. The bond makes semi-annual coupon
payments. The bond’s yield to maturity is
9%. In Excel, the =PV formula can be used to find the
price of the bond. Fill in the table with the
appropriate values:
RATE
NPER
PMT
FV
TYPE
Repeat problem , but with annual coupon payments.
RATE
NPER
PMT
FV
TYPE

A $1,000 face value corporate bond with a 6.75 percent coupon
(paid semiannually) has 10 years left to maturity. It has had a
credit rating of BB and a yield to maturity of 8.2 percent. The
firm recently became more financially stable and the rating agency
is upgrading the bonds to BBB. The new appropriate discount rate
will be 7.1 percent. What will be the change in the bond’s price in
dollars and percentage terms? round your answers to 3...

A bond has a face value of $1,000, a coupon rate of 8%, and a
maturity of 10 years. The bond makes semi-annual coupon
payments. The bond’s yield to maturity is
9%. In Excel, the =PV formula can be used to find the
price of the bond. Fill in the table with the
appropriate values:
RATE
NPER
PMT
FV
TYPE

Last year Janet purchased a $1,000 face value corporate bond with
an 7% annual coupon rate and a 15-year maturity. At the time of the
purchase, it had an expected yield to maturity of 7.42%. if janet
sold the bond today for $991.19, what rate of return would she have
earned for the past year? round your answer to two decimal
places.

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