Question

1) Bond with a $1.000 par value has an 8 percent annual coupon rate. It will mature in 4 years, and annual coupon payments are made at the end of each year. Present annual yields on similar bonds are 6 percent. What should be the current price? - a. S1.069.31 b. S1.000.00 c. $9712 d. $927.66 e. none of the above 2) A bond with a ten percent coupon rate bond pays interest semi-annually. Par value is $1.000. The bond has three years to maturity. The investors' required rate of return is 12 percent. What is the present value of the bond? 126 a. $1,021 2-6 b. S1.000 c. $981 d. 1951 e. none of the above In Food by 3) Bond with a 12 percent quarterly coupon rate has a yield to maturity of 16 percent. The bond has a par value of $1,000 and matures in 20 years. Based on this information, a fair price of this bond iss FV a 1,302 b. 763 c. 761 d. 1,299 X1000 - M 4) Ezzell Enterprises' noncallable bonds currently sell for S1.165. They have a 15-year maturity, an annual coupon of 595, and a par value of $1,000. What is their yield to maturity? a 6,20% b. 6.53% c. 6.87%

Answer 1

B2 - i ДА В DE F H 1 3 $1,000 $ 80 $1,000 $30 par value annual coupon payment years markert interest rate current price par value semiannual coupon payment quarterly periods quarterly markert interest rate fair price of the bond 80 4% 6% $ 1,069.30 $ 761 hence, the correct answer is a. $1,069.31 hence, the correct answer is c. $761 par value $1,000 $ 50 semiannual coupon payment semiannual periods semiannual markert interest rate present value of bond current selling price years annual coupon payment par value yield to maturity $ 1,165 15 $ 95 $1,000 7.62% 6% $ 951 hence, the correct answer is d. $951

for formulas and calculations, refer to the image below -

B2 1 x fc 1 A B 3 1000 =D2*8% par value annual coupon payment years markert interest rate current price par value 1000 semiannual coupon payment =H2*12%/4 quarterly periods =20*4 quarterly markert interest rate =16%/4 fair price of the bond --PV(H5, H4, H3, H2) 0.06 |--PV(D5, D4,D3,D2) hence, the correct answer is a. $1,069.31 hence, the correct answer is c. $761 1165 15 par value 1000 semiannual coupon payment =D10*10%/2 semiannual periods 1=3*2 semiannual markert interest rate =12%/2 present value of bond --PV(D13,012,011,D10) current selling price years annual coupon payment par value yield to maturity 95 1000 =RATE(H11, H12,-H10, H13) hence, the correct answer is d. $951

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