| 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 |
