Question

2. Ashes Divide Corporation has bonds on the market with 14.5 years to maturity, a YTM of 6.8 percent, and a current price of $924. The bonds make semiannual payments. What must the coupon rate be on these bonds? *

a. 5.45%

b. 2.72%

c. 5.96%

d. 2.98%

e. None of the above

3. A bond has a quoted price of $1,080.42. It has a face value of $1,000, a semiannual coupon of $30, and a maturity of five years. What is its current yield and its yield to maturity? *

a. CY=5.55%; YTM = 4.22%

b. CY= 5.55%; YTM = 2.1%

c. CY= 2.77% ; YTM =2.1%

d. CY= 2.77%; YTM= 4.22%

e. None of the above

4. You’re looking at two bonds identical in every way except for their coupons and, of course, their prices. Both have 12 years to maturity. The first bond has a 10 percent annual coupon rate and sells for $935.08. The second has a 12 percent annual coupon rate. What do you think it would sell for? *

a. $1,072.44

b. $1,055.23

c. $983.4

d. $975.5

e. None of the above

5. A Microgates Industries bond has a 10 percent coupon rate and a $1,000 face value. Interest is paid semiannually, and the bond has 20 years to maturity. If investors require a 12 percent yield, what is the bond’s value? *

a. $849.45

b. $879.60

c. $985.18

d. $963.15

e. None of the above

6. Software has 9.2 percent coupon bonds on the market with nine years to maturity. The bonds make semiannual payments and currently sell for 106.8 percent of par. What is the bond’s YTM? *

a. 4.08%

b. 8.16%

c. 5.24%

d. 10.48%

e. None of the above

Answer 1