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Exam 6: Bonds

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Question 21

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What issues should one be careful of when calculating the bond price from its yield to maturity using the "time value of money" (TVM)keys of a financial calculator?

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It is quite simple to transfer the bond ...

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Question 22

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A firm issues ten-year bonds with a coupon rate of 6.5%,paid semiannually.The credit spread for this firm's ten-year debt is 0.8%.New ten-year Treasury notes are being issued at par with a coupon rate of 5%.What should the price of the firm's outstanding ten-year bonds be per $100 of face value?

A) $97.28
B) $98.27
C) $100.86
D) $105.26

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Question 23

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Which of the following statements are true?

What is the coupon rate of a two-year,$10,000 bond with semiannual coupons and a price of $9543.45,if it has a yield to maturity of 6.8%?

A company issues a ten-year bond at par with a coupon rate of 6% paid semi-annually.The YTM at the beginning of the third year of the bond (8 years left to maturity) is 7.8%.What was the percentage change in the price of the bond over the past two years?

Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments) .The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Suppose that when these bonds were issued,Luther received a price of $972.42 for each bond.What is the likely rating that Luther's bonds received?

A firm issues 20-year bonds with a coupon rate of 4.8%,paid semiannually.The credit spread for this firm's 20-year debt is 1.2%.New 20-year Treasury notes are being issued at par with a coupon rate of 4.6%.What should the price of the firm's outstanding 20-year bonds be if their face value is $1000?

A bond is said to mature on the date when the issuer repays its notional value.

What is the yield to maturity of a one-year,risk-free,zero-coupon bond with a $10,000 face value and a price of $9600 when released?

Which of the following bonds is trading at a premium?

Use the table for the question(s) below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value) : -Based upon the information provided in the table above,you can conclude

What is the yield to maturity of a ten-year,$1000 bond with a 5.2% coupon rate and semiannual coupons if this bond is currently trading for a price of $884?

A corporation issues a bond that generates the above cash flows.If the periods shown are 3 months,which of the following best describes that bond?

Use the figure for the question(s) below. -The current zero-coupon yield curve for risk-free bonds is shown above.What is the price per $100 face value of a four-year,zero-coupon,risk-free bond?

Assuming the appropriate YTM on the Sisyphean bond is 9.0%,then the price that this bond trades for will be closest to:

What care,if any,should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

Prior to its maturity date,the price of a zero-coupon bond is its face value.

Use the figure for the question(s) below. -A risk-free,zero-coupon bond with a $5000 face value has ten years to maturity.The bond currently trades at $3650.What is the yield to maturity of this bond?

Bonds with a high risk of default generally offer high yields.

Which of the following bonds will be most sensitive to a change in interest rates?