1) A 20-year bond with par value of $1,000 has the 9 percent annual coupon. Bond presently sells for $925. If bond's yield to maturity remains at its present rate, find the price of bond 5 years from now?
i) $ 966.79
ii) $ 831.35
iii) $1,090.00
iv) $ 933.09
v) $ 925.00
2) You might have heard of zero coupon bonds i.e. zero-coupon bonds pay their owners $1,000 at maturity and engage no other cash flows other than purchase price. If you purchased the zero coupon bond for $300, held bond for 10 years, and then cashed it in for $1,000 at the ending of 10th year, determine the average annual rate of return that would you realize on your investment?
i) 1.28%
ii) 12.79%
iii) 113%
iv) 30%
v) 233%
3) In a newspaper one of Microsoft's bonds is given as follows: Microsoft 7 30 According to this listing:
i) Bond was issued on July 30 (7/30).
ii) Bond matures in seven years and its yield if held to maturity is 30%.
iii) Coupon interest rate for this bond is 7% and it matures in 2030.
iv) Yield to maturity for this bond is 7% and it matures in 30 years.