1. A $1,000 face value bond currently has a yield to maturity of 5.4 percent. The bond matures in 6 years and pays interest semi-annually. The coupon rate is 4 percent. What is the current price of this bond?
2. Best Western has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in 8 years, and have a 6 percent coupon rate. The current price is quoted at $1045. What is the yield to maturity?
3. XYZ has a $1000 Face Value 5% Coupon Bond (paid semi-annually). The bond is selling for $937.19 today and matures in 8 years. (The YTM today is 6.0%)
a. What will be the price of the bond in 1 year (the bonds now have 7 years left until maturity) if the YTM investors demand in 1 year is still 6.0%?
b. What will be the price of the bond in 1 year (the bonds now have 7 years left until maturity) if the YTM investors demand in 1 year is 5.7%?
4. ABC Co wants to raise $6 million for an expansion project. The company wants to raise this money by selling zero coupon bonds with a par value (face value) of $1000. These bonds would be sold with a Yield to Maturity of 4% per year with semi-annual compounding. How many bonds must ABC sell in order to raise the $6 million dollars?