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IF Study Questions for Bond Valuation

# IF Study Questions for Bond Valuation - BUSFIN 1030...

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BUSFIN 1030 – Introduction to Finance Study Questions for Bond Valuation 1. Consider a 20-year bond that has a face value of \$1,000 and a coupon rate of 9% with annual coupon payments. The YTM of the bond is 8%. a. What is the maximum price would you be willing to pay for this bond right now? b. What is the maximum price would you be willing to pay for this bond right after its 4 th coupon payment? 2. Consider a 10-year bond that has a face value of \$10,000 and a coupon rate of 8% with annual coupon payments. The YTM of the bond is 11%. a. What is the maximum price would you be willing to pay for this bond right now? b. What is the maximum price would you be willing to pay for this bond right after its 7 th coupon payment? c. What is the maximum price would you be willing to pay for this bond right after its 7 th coupon payment if YTM at the time is expected to be 7%? 3. Consider a 15-year bond that has a face value of \$1,000 and a coupon rate of 9% with semiannual coupon payments. The YTM of the bond is 7%. a. What is the maximum price would you be willing to pay for this bond right now?

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