Question

1. Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 9 years to maturity, and a coupon rate of 8 percent paid annuallly. If the yield to maturity is 10 percent, what is the current price of the bond? €1,030.00 €1,128.94 $840.58 €929.06 €884.82 2. Gabriele Enterprises has bonds on the market making annual payments, with 5 years to maturity, a par value of $1,000, and selling for $770. At this price, the bonds yield 7.9 percent. What must the coupon rate be on the bonds? 2.25% 7.90% 2.80% 4.31% 2.15% 4. West Corp. issued 18-year bonds 2 years ago at a coupon rate of 9.5 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM? 9.80% 10.69% 8.02% 4.45% 8.91%

Answer 1

1.

Calcullating Price of Bond,

Using TVM Calculation,

PV = [FV = 1,000, PMT = 80, N = 9, I = 0.10]

PV = €884.82

2.

Calculating Coupon Rate,

Using TVM calculation,

PMT = [FV = 1,000, PMT = -770, N = 5, I = 0.079]

PMT = 21.55

Coupon Rate = 2.15%

3.

Calculating Yield to Maturity,

Using TVM Calculation,

I = [PV = -1,050, FV = 1,000, N = 32, PMT = 47.50]

I = 8.91%