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 |