Question

4. Han Corporation issues a bond which has a coupon rate of 8.6%, a yield to maturity of 10.4%, a face value of $1,000, and a market price of $990. What is the semiannual interest payment? Round to two decimal places.

5. A shipping company sold an issue of 20-year $1,000 par bonds to build new ships. The bonds pay 6% interest, compounded semiannually. Today's required rate of return is 8.5%. How much should these bonds sell for today? Round to two decimal places.

6. Atlantis Company issued bonds on January 1, 2006. The bonds had a coupon rate of 5.0%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2028. What is the yield to maturity for these bonds on January 1, 2020 if the market price of the bond on that date is $960? Submit your answer as a percentage and round to two decimal places.

7. Consider a 12-year bond with face value $1,000 that pays an 8.6% coupon semi-annually and has a yield-to-maturity of 7.7%. What is the approximate percentage change in the price of bond if interest rates in the economy are expected to decrease by 0.60% per year? Submit your answer as a percentage and round to two decimal places. (Hint: What is the expected price of the bond before and after the change in interest rates?)

Answer 1

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