1. Which of the adhering to occasions would make it more likely that a firm would pick to contact its exceptional callable bonds?
a. A reduction in industry interest prices.
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b. The company"s bonds are downgraded.
c. An rise in the call premium.
d. Answers a and also b are correct.
e. Answers a, b, and c are correct.
2. Which of the adhering to statements is a lot of correct?
a. All else equal, if a bond"s yield to maturity increases, its price will loss.
b. b. All else equal, if a bond"s yield to maturity rises, its current yield will autumn.
c. c.If a bond"s yield to maturity exceeds the coupon price, the bond will certainly market at a premium over par.
d. All of the answers above are correct.
e. Namong the answers over is correct.
3. Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and also renders semiyearly interemainder payments of $40. If you call for a 10 percent nominal yield to maturity on this investment, what is the maximum price you have to be willing to pay for the bond?
4. Consider a $1,000 par worth bond through a 7 percent annual coupon. The bond pays interemainder annually. Tright here are 9 years staying till maturity. What is the present yield on the bond assuming that the compelled return on the bond is 10 percent?
5. A corporate bond through a $1,000 confront worth pays a $50 coupon every 6 months. The bond will certainly mature in ten years, and also has a nominal yield to maturity of 9 percent. What is the price of the bond?
6. The existing industry price of Smith Corporation"s 10 percent, 10 year bonds is $1,297.58. A 10 percent coupon interest price is passist semieach year, and the par value is equal to $1,000. What is the YTM (declared on a nominal, or annual, basis) if the bonds mature 10 years from today?
7. Which of the following has the greatest price risk?
a. A 10-year, $1,000 confront worth, 10percent coupon bond with semiannual interemainder payments.
b. A 10-year, $1,000 face worth, 10percent coupon bond via annual interest payments.
c. A 10-year, $1,000 face worth, zero coupon bond.
d. A 10-year $100 annuity.
e. All of the over have the same price threat since they all mature in 10 years.
8. You just purchased a 10-year corpoprice bond that has an annual coupon of 10 percent. The bond sells at a premium over par. Which of the adhering to statements is many correct?
a. The bond"s yield to maturity is much less than 10 percent.
b. The bond"s existing yield is higher than 10 percent.
c. If the bond"s yield to maturity stays continuous, the bond"s price will be the exact same one year from now.
d. Statements a and c are correct.
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e. Namong the answers over is correct.
9. JRJ Corporation newly issued 10-year bonds at a price of $1,000. These bonds pay $60 in interemainder each 6 months. Their price has actually stayed steady because they were issued, i.e., they still offer for $1,000. Due to additional financing requirements, the firm wishes to concern brand-new bonds that would certainly have maturity of 10 years, a par worth of $1,000, and pay $40 in interemainder eexceptionally six months. If both bonds have actually the very same yield, just how many type of brand-new bonds have to JRJ concern to raise $2,000,000 cash?
10.Assume that a 15-year, $1,000 challenge worth bond pays interest of$37.50 eincredibly 3 months. If you call for a nominal yearly rate of return of 12 percent, through quarterly compounding, how a lot have to you be willing to pay for this bond? (Hint: The PVIFA and also PVIF for 3 percent, 60 durations are 27.6748 and also 0.1697, respectively.)
11. Your client has been available a 5-year, $1,000par value bond through a 10 percent coupon. Interemainder on this bond is paid quarterly. If your client is to earn a nominal rate of return of 12 percent, compounded quarterly, just how a lot should she pay for the bond?
12. A $1,000 par worth bond sells for $1,216. It matures in 20 years, has a 14 percent coupon, pays interest semievery year, and can be dubbed in 5 years at a price of $1,100.What is the bond"s YTM and YTC?