Question

1.)

Last year Janet purchased a $1,000 face value corporate bond with an 8% annual coupon rate and a 15-year maturity. At the time of the purchase, it had an expected yield to maturity of 12.09%. If Janet sold the bond today for $1,055.86, what rate of return would she have earned for the past year? Do not round intermediate calculations. Round your answer to two decimal places.

2.)

Bond X is noncallable and has 20 years to maturity, a 11% annual coupon, and a $1,000 par value. Your required return on Bond X is 10%; if you buy it, you plan to hold it for 5 years. You (and the market) have expectations that in 5 years, the yield to maturity on a 15-year bond with similar risk will be 11.5%. How much should you be willing to pay for Bond X today? (Hint: You will need to know how much the bond will be worth at the end of 5 years.) Do not round intermediate calculations. Round your answer to the nearest cent.

3.)

Lourdes Corporation's 14% coupon rate, semiannual payment, $1,000 par value bonds, which mature in 10 years, are callable 6 years from today at $1,050. They sell at a price of $1,392.83, and the yield curve is flat. Assume that interest rates are expected to remain at their current level.

What is the best estimate of these bonds' remaining life? Round
your answer to two decimal places.

years

If Lourdes plans to raise additional capital and wants to use debt financing, what coupon rate would it have to set in order to issue new bonds at par?

Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTM.

Since Lourdes wishes to issue new bonds at par value, the coupon rate set should be the same as that on the existing bonds.

Since Lourdes wishes to issue new bonds at par value, the coupon rate set should be the same as the current yield on the existing bonds.

Since interest rates have risen since the bond was first issued, the coupon rate should be set at a rate above the current coupon rate.

Since the bonds are selling at a premium, the coupon rate should be set at the going rate, which is the YTC.

Answer #1

1)

Lourdes Corporation's 13% coupon rate, semiannual payment,
$1,000 par value bonds, which mature in 20 years, are callable 4
years from today at $1,075. They sell at a price of $1,279.30, and
the yield curve is flat. Assume that interest rates are expected to
remain at their current level.
What is the best estimate of these bonds' remaining life? Round
your answer to two decimal places.
years
If Lourdes plans to raise additional capital and wants to use
debt financing,...

Lourdes Corporation's 12% coupon rate, semiannual payment,
$1,000 par value bonds, which mature in 10 years, are callable 6
years from today at $1,050. They sell at a price of $1,306.57, and
the yield curve is flat. Assume that interest rates are expected to
remain at their current level.
What is the best estimate of these bonds' remaining life? Round
your answer to two decimal places.
If Lourdes plans to raise additional capital and wants to use
debt financing, what...

Last year Janet purchased a $1,000 face value corporate bond
with an 8% annual coupon rate and a 15-year maturity. At the time
of the purchase, it had an expected yield to maturity of 12.44%. If
Janet sold the bond today for $1,021.35, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

. Last year Janet purchased a $1,000 face value corporate bond
with an 10% annual coupon rate and a 20-year maturity. At the time
of the purchase, it had an expected yield to maturity of 13.08%. If
Janet sold the bond today for $1,051.15, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

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.

Last year Janet purchased a $1,000 face value corporate bond
with an 10% annual coupon rate and a 15-year maturity. At the time
of the purchase, it had an expected yield to maturity of 7.95%. If
Janet sold the bond today for $1,104.19, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

Last year Janet purchased a $1,000 face value corporate bond
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of the purchase, it had an expected yield to maturity of 10.2%. If
Janet sold the bond today for $1,140.91, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

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with a 7% annual coupon rate and a 20-year maturity. At the time of
the purchase, it had an expected yield to maturity of 6.89%. If
Janet sold the bond today for $1,100.22, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.
%

Last year Janet purchased a $1,000 face value corporate bond
with a 10% annual coupon rate and a 20-year maturity. At the time
of the purchase, it had an expected yield to maturity of 9.26%. If
Janet sold the bond today for $1,008.42, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.

Last year Janet purchased a $1,000 face value corporate bond
with an 7% annual coupon rate and a 10-year maturity. At the time
of the purchase, it had an expected yield to maturity of 12.5%. If
Janet sold the bond today for $1,137.79, what rate of return would
she have earned for the past year? Do not round intermediate
calculations. Round your answer to two decimal places.
________%

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