Question

# 1​(Bond valuation) Calculate the value of a bond that matures in 19 years and has a \$ 1 comma 000 par

value. The annual coupon interest rate is 11 percent and the​ market’s required yield to maturity on a​ comparable-risk bond is 9 percent.

2 Bond valuation) A bond that matures in 10 years has a ​\$1 comma 000 par value. The annual coupon interest rate is 7 percent and the​ market’s required yield to maturity on a​ comparable-risk bond is 12 percent. What would be the value of this bond if it paid interest​ annually? What would be the value of this bond if it paid interest​ semiannually?

3 ​(Bond valuation) ​Pybus, Inc. is considering issuing bonds that will mature in 16 years with an annual coupon rate of 9 percent. Their par value will be ​\$1 comma 000​, and the interest will be paid semiannually. Pybus is hoping to get a AA rating on its bonds​ and, if it​ does, the yield to maturity on similar AA bonds is 11 percent. ​ However, Pybus is not sure whether the new bonds will receive a AA rating. If they receive an A​ rating, the yield to maturity on similar A bonds is 12 percent. What will be the price of these bonds if they receive either an A or a AA​ rating?

4 (Yield to​ maturity) The market price is ​\$1 comma 050 for a 12​-year bond ​(\$1 comma 000 par​ value) that pays 11 percent annual​ interest, but makes interest payments on a semiannual basis ​(5.5 percent​ semiannually). What is the​ bond’s yield to​ maturity?

5 Doisneau 18​-year bonds have an annual coupon interest of 12 ​percent, make interest payments on a semiannual​ basis, and have a ​\$1 comma 000 par value. If the bonds are trading with a​ market’s required yield to maturity of 13 ​percent, are these premium or discount​ bonds? Explain your answer. What is the price of the​ bonds?

6 ​(Bond valuation) ​Fingen’s 14​-year, ​\$1 comma 000 par value bonds pay 15 percent interest annually. The market price of the bonds is ​\$950 and the​ market’s required yield to maturity on a​ comparable-risk bond is 17 percent.

a. Compute the​ bond’s yield to maturity.

b. Determine the value of the bond to​ you, given your required rate of return.

c. Should you purchase the​ bond?

7 ​(Yield to​ maturity) Abner​ Corporation’s bonds mature in 17 years and pay 7 percent interest annually. If you purchase the bonds for ​\$750​, what is your yield to​ maturity?

8 ​(Bond valuation) The 15​-year ​\$1 comma 000 par bonds of Vail Inc. pay 12 percent interest. The​ market’s required yield to maturity on a​ comparable-risk bond is 15 percent. The current market price for the bond is \$ 910.

a. Determine the yield to maturity.

b. What is the value of the bonds to you given the yield to maturity on a​ comparable-risk bond?

c. Should you purchase the bond at the current market​ price?

Finance