Question 1: Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 6%. What is the new price of the bonds, given that they now have 19 years to maturity?
- $1,046.59
- $1,111.58
- $1,133.40
- $1,177.78
- $1,189.04
Question 2: Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their yield to maturity?
- 6.87%
- 7.03%
- 7.21%
- 7.45%
- 7.61%
Question 3: Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 8 percent; and the yield to maturity is 9 percent. What is the bond's current market price?
Question 4: An investor purchased the following five bonds. Each of them had an 8 percent yield to maturity on the purchase day. Immediately after she purchased them, interest rates fell and each then had a new YTM of 7 percent. What is the percentage change in price for each bond after the decline in interest rates?
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Price at 8%
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Price at 7%
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% Change
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10-year, 10% annual coupon
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10-year zero
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5-year zero
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30-year zero
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$100 perpetuity
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