FINAN

Name: ………………………………………………………………………………… Hmk-6B

Exercise #1: Draw the time line for an 8-year 5% annual coupon bond with a face value of $1000.

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Compute the price of the bond assuming the yield to maturity is:

A. ytm = 3% FV = PMT= i= n= Press PV P = $ ……[1]..…………

B. ytm = 7% FV = PMT= i= n= Press PV P = $ ……[2].……………

Exercise #2: Draw the time line for a 12-year 4% annual coupon bond with a face value of $1000.

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Compute the current yield and the yield to maturity for the bond assuming the price is:

A. P = 109 FV = PMT= PV= n= Press i ytm = ……[3]…………% cy = ………[4]………%

B. P = 97 FV = PMT= PV= n= Press i ytm = ………[5]………% cy = ………[6]………%

Exercise #3: A 5-year 5% ann BB-rated corporate bond’s yield to maturity is 4%. Price = ………[7]…………

The bond gets upgraded to AA-. It’s yield is likely to be ……[8]…… than 4% and ……[9]……… than 5%,

lower/higher lower/higher

and the price is likely to ……………[10]……………… .

go up/go down

Exercise #4: Compute the coupon rate for a 3-year annual coupon bond assuming the price is 98 and

the yield is 6.1%. Hint: We are solving for PMT (coupon) and expressing it as percent of par.

= = = = Press Coupon= ………[11…………%

First Three Letters

000