Question

What is the price of a 10-year, $1,000 bond with a 6% coupon rate and semiannual coupons if the bond’s yield to maturity is 9% (APR with semiannual compounding)?

		$864.10
		$1,038.07
		$804.88
		$1,077.95

Consider a project with the following cash flows:

Year                     0                 1                      2                      3                      4

Cash Flow      -10,000         4,000               4,000               4,000               4,000

What is the internal rate of return (IRR) of the above project?

		23.23%
		22.05%
		21.86%
		20.82%

Security:         AAA    AA      A         BBB    BB

Yield (%):       5.0       5.5       6.0       6.4       8.0

A mining company needs to raise $100 million in order to begin open pit mining of a coal seam. The company will fund this by issuing 30-year bonds with a face value of $1,000 and a coupon rate of 6%, with the coupons paid annually. The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings. If the mining company's bonds receive an AAA rating, what will be their selling price?

		$1,153.72
		$947.22
		$774.84
		$1,072.67

Answer 1

1)

Computation Of Bond Price
a	Semi-annual Interest Amount	$                       30.00
	($1000*6%/2)
b	PV Annuity Factor for (20 Years,4.5%)	13.007936
c	Present Value Of Annual Interest (a*b)	$                    390.24
d	Redemption Value	$                 1,000.00
e	PV Factor Of (20 Years,4.5%)	0.41464
g	Present Value Of Redemption Amount (d*e)	$                    414.64
f	Price Of The Bond (c+g)	$                    804.88

2)

3)

Computation Of Bond Price
a	Annual Interest Amount	$                       60.00
	($1000*6%)
b	PV Annuity Factor for (30 Years,5%)	15.372451
c	Present Value Of Annual Interest (a*b)	$                    922.35
d	Redemption Value	$                 1,000.00
e	PV Factor Of (30 Years,5%)	0.23138
g	Present Value Of Redemption Amount (d*e)	$                    231.38
f	Value   Of The Bond (c+g)	$                 1,153.72