Question:
ABC has issued a $1000 par bond with 25 years to maturity, 7% coupon rate, and semi-annual payments. Calculate the present value if the bond if the YTM is 7%.
1. How would the answer to #1 change if the YTM is 9%?
2. How would the answer to #1 change if the YTM is 5%?
3. What bond relationship are Problems 1-3 discussing?
1. ABC issued 12-year bonds at a coupon rate of 8% with semi-annual payments. If the bond currently sells for $1050 of par value, what is the YTM?
2. ABC issued 12-year bonds 2 years ago at a coupon rate of 8% with semi-annual payments. If the bond currently sells for 105% of par value, what is the YTM?
3. A bond has a quoted price of $1,080.42. It has a face value of $1000, a semi-annual coupon of $30, and a maturity of five years. What is the current yield? What is the yield to maturity?
4. The 6 percent annual coupon bonds of Greentree, Inc. are selling for $1,020, have a face value of $1,000, and have a yield to maturity of 5.43 percent. How many years will it be until these bonds mature?
5. A 7 percent semi-annual coupon bond is priced at $1,028.33. The bond has a $1,000 face value and a yield to maturity of 6.49 percent. How many years will it be until this bond matures?
1. ABC has $1,000 face value bonds outstanding. These bonds pay interest semi-annually, mature in 10 years, and have a 7.5 percent coupon. The current price is quoted at 99.59 percent of par value. What is the yield to maturity? What is the current yield?
2. Refer to #1 above. Suppose the bonds are callable in 5 years at 105 percent of par value, what is the yield-to-call?
3. ABC's bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 12 years. What is the yield to maturity? What is the current yield?
4. Refer to #3 above. Suppose the bonds are callable in 5 years at 110 percent of par value, what is the yield-to-call?
QUESTION 1
1. You paid $832 for a corporate bond that has a 5.51% coupon rate. What is the current yield?
Hint: if nothing is mentioned, then assume par value = $1,000
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
QUESTION 2
1. The yield to maturity on a Marshall Co. premium bond is 7.6 percent. This is the:
• nominal rate.
• effective rate.
• real rate.
• current yield.
• coupon rate.
QUESTION 3
1. The rate required in the market on a bond is called the:
• liquidity premium
• call yield
• risk premium
• yield to maturity
• current yield
QUESTION 4
1. A premium bond is a bond that:
• is callable within 12 months or less.
• has a market price which exceeds the face value.
• has a par value which exceeds the face value.
• is selling for less than par value.
• has a face value in excess of $1,000.
QUESTION 5
1. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 16 years; Coupon rate: 4%;
Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 9.64%
QUESTION 6
1. ABC's Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?
QUESTION 7
1. The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _____ percent.
QUESTION 8
1. ABC's bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 8 years. What is the yield to maturity?
QUESTION 9
1. Stealers Wheel Software has 5.25% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 109.17% of par. What is the current yield?
QUESTION 10
1. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 13 years; Coupon rate: 4%;
Assume annual coupon payments. Calculate the price of this bond if the YTM is 7.12%
QUESTION 11
1. The 5.2 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $889.55. What is the current yield?
QUESTION 12
1. Assume that you wish to purchase a 14-year bond that has a maturity value of $1,000 and a coupon interest rate of 5%, paid semiannually. If you require a 5.77% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.
QUESTION 13
1. ABC wants to issue 19-year, zero coupon bonds that yield 11.5 percent. What price should they charge for these bonds if they have a par value of $1,000? That is, solve for PV. Assume annual compounding.
Hint: zero coupon bonds means PMT = 0
QUESTION 14
1. The 12.4 percent coupon bonds of the Peterson Co. are selling for $1,114.17. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent.
Enter your answer in percentages rounded off to two decimal points.
QUESTION 15
1. ABC Corp. issued 15-year bonds 2 years ago at a coupon rate of 10.6%. The bonds make semi-annual payments. If these bonds currently sell for 97% of par value, what is the YTM?
QUESTION 16
1. A firm's bonds have maturity of 10 years with a $1000 face value, an 8% semi-annual coupon, are callable in 5 years, at $1,050, and currently sells at a price of $1,100. What is the yield to call (YTC)?
QUESTION 17
1. BCD's $1,000 par value bonds currently sell for $798.40. The coupon rate is 10%, paid semi-annually. If the bonds have 5 years to maturity, what is the yield to maturity?