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BCOR 2200 Spring 2009 Mid 2 Ver 1 with Answers

# BCOR 2200 Spring 2009 Mid 2 Ver 1 with Answers - BCOR 2200...

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1. A \$1,000 face value bond with 10 years to maturity has a coupon rate of 5.00%. The bond makes semi-annual payments and has a YTM 9.00%. Calculate the bond’s price. a. \$739.84 N = 10 x 2 = 20, PMT = 0.05/2 = 0.025, FV = \$1,000, R = 4.50 b. \$743.29 PV = 739.84 c. \$953.53 d. \$1,308.87 e. \$,1331.78 2. A bond with 15 years to maturity has a coupon rate of 8.40%. The bond makes semi-annual payments. The bond currently sells for 97% of par. Calculate the YTM. 3. Bond X is a 20 year bond with a 10% coupon and 7% YTM. Bond Y is a 5 year bond with a 10% coupon and 7% YTM. Both bonds make semi-annual payments. You believe interest rates will rise in the short term. Would you rather hold Bond X or Bond Y? Why?
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