1. Bond X is noncallable, has 17 years to maturity, a 6.5% annual coupon, and a RM 1000 par value. Your required return on Bond X is 7%. If you buy it, you plan to hold it for 3 years. You, and the market, have expectations that in 3 years the yield to maturity on a 14-year bond with similar risk will be 8%. What is the maximum bond price you are willing to pay today? What is the expected bond’s current yield and the capital gain in the first year?
2. Corporate X’s bonds are currently yielding 8.5%, with the following estimates of current interest rate premiums: inflation premium (3.35%); liquidity premium (0.7%), maturity risk premium (1.5%); default risk premium (2.25%). What is the real risk-free rate of return?
3. A bond has 10 years remaining to maturity. Interest is paid annually; they have a $1000 par value; the coupon interest rate is 8%; and the yield to maturity is 9%. What is bond’s current market price? Is the bond selling at a discount, premium, or par?
4. Company A’s outstanding bonds have a $1,000 par value, a 9% semiannual coupon, 8 years to maturity, and an 8.5% yield to maturity. What is the bond’s price? Is the bond selling at a discount, premium, or par?
5. A bond currently trades at RM985 on the secondary market. The bond has 11 years until maturity and pays an annual coupon at 9% of face v.