# TXST FIN 3312- Business Finance; Exam 4

 Lycan, Inc., has 8.3 percent coupon bonds on the market that have 7 years left to maturity. The bonds make annual payments and have a par value of \$1,000. If the YTM on these bonds is 10.3 percent, what is the current bond price? CURRENT BOND PRICE=?PMT= 8.3%=> .083×1000=83N= 7yrs FV= 1000 par value I= 10.3 YTM PV= \$903.59 The Timberlake-Jackson Wardrobe Co. has 11.8 percent coupon bonds on the market with eight years left to maturity. The bonds make annual payments and have a par value of \$1,000. If the bonds currently sell for \$1,124.97, what is the YTM? YTM=?PMT= 11.8%=> .118×1000=118N= 8yrsFV= 1000 par value PV= -1,124.97 I= 9.50% Barnes Enterprises has bonds on the market making annual payments, with 18 years to maturity, a par value of \$1,000, and a price of \$970. At this price, the bonds yield 8.2 percent. What must the coupon rate be on the bonds? COUPON RATE=?N= 18yrsFV= 1000 par valuePV= -970 I= 8.2%PMT= 78.75/1000Coupon Rate= 7.88% Harrison Co. issued 15-year bonds one year ago at a coupon rate of 6.6 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.5 percent, what is the current dollar price assuming a \$1,000 par value? SEMI ANNUALCURRENT BOND PRICE=?N= 15yrs (-1)=> 14x2I= 5.5% /2 PMT= 6.6%=> .066×1000=66/2 FV= 1000 par value PV= \$1106.43 Stein Co. issued 17-year bonds two years ago at a coupon rate of 8.6 percent. The bonds make semiannual payments. If these bonds currently sell for 110 percent of par value, what is the YTM? SEMI ANNUALYTM=?N= 17yrs (-2)=> 15x2PMT= 8.6%=> .086/2PV= 110% of par=> 1.10×1000= -1100FV= 1000 par value I= 3.740 %x2YTM= 7.48% What is the principal amount of a bond that is repaid at the end of the loan term called? Face Value On which one of the following dates is the principal amount of a semiannual coupon bond repaid? The entire bond is repaid on the maturity date The market-required rate of return on a bond that is held for its entire life is called the: Yield to Maturity A protective covenant: Limits the actions of the borrower A real rate of return is defined as a rate that has been adjusted for which one of the following? Inflation The rate of return an investor earns on a bond prior to adjusting for inflation is called the: Nominal Rate The inflation premium: Compensates investors for expected price increases Changes in interest rates affect bond prices. Which one of the following compensates bond investors for this risk? Interest rate risk premium Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected? Default Risk Premium When a bond’s yield to maturity is less than the bond’s coupon rate, the bond: Is selling at a premium
Share