Question

Rockinghouse Corp. management plans to issue seven-year zero coupon bonds. It has learned that these bonds will sell today at a price of $365.13. Assuming annual coupon payments, what is the yield to maturity on these bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Electrolex, Inc., has four-year bonds outstanding that pay a coupon rate of 12.76 percent and make coupon payments semiannually. If these bonds are currently selling at $914.89.

What is the yield to maturity that an investor can expect to earn on these bonds? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

What is the effective annual yield? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Adrienne Dawson is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds have a face value of $1,000 and are currently selling at $413.45, what is the expected return on them? Assume that interest compounds semiannually on similar coupon paying bonds. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

The Gold Company is applying for a five-year term loan from its bank. The lender determines that the firm should pay a default risk premium of 1.75 percent over the Treasury rate. The five-year Treasury rate is currently 5.65 percent. The firm must also pay a marketability risk premium of 0.80 percent. What is the total borrowing cost to the firm?

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $6,662.31. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $10,410, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Answer 1

1)

A B с 6 $ 1,000 0.0% 7 8 1 9 A Face value (FV) Coupon rate C Number of compounding periods pery AxB:C Interest per period (PMT) Bond price (PV) D Number of years to maturity Number of compounding periods till DxC maturity (NPER) Yield to maturity $ $ 10 365.13 11 7 12 7 RATE(NPER, PMT,-PV,FV)]x1 13 14 15 Yield to maturity 15.48% =RATE(7,0,-365.13,1000)x1 16

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