A+ Answers

QUESTION 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    

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        

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      

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

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%

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 6             

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)?

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 7             

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            

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             

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?

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 10

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%

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

QUESTION 11

The 5.2 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $889.55. What is the current yield?

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 12              

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.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.              

QUESTION 13             

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             

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.             

QUESTION 14              

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   

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?   

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.