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HW Chapter 5 final

HW Chapter 5 final - 4 Garvin Enterprises bonds currently...

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Homework Chapter 5 Solutions ____ ____ 1. Assume that all interest rates in the economy decline from 10% to 9%. Please calculate the price change for each of the bonds below a. An 8-year bond with a 9% coupon. b. A 1-year bond with a 15% coupon. c. A 3-year bond with a 10% coupon. d. A 10-year zero coupon bond. e. A 10-year bond with a 10% coupon. ____ 2. D. J. Masson Inc. recently issued noncallable bonds that mature in 10 years. They have a par value of \$1,000 and an annual coupon of 5.5%. If the current market interest rate is 7.0%, at what price should the bonds sell? ____ 3. Consider some bonds with one annual coupon payment of 7.25%. The bonds have a par value of \$1,000, a current price of \$1,125, and they will mature in 13 years. What is the yield to maturity on these bonds?

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Unformatted text preview: ____ 4. Garvin Enterprises' bonds currently sell for \$1,150. They have a 6-year maturity, an annual coupon of \$85, and a par value of \$1,000. What is their current yield ? ____ 5. Assume that you are considering the purchase of a 15-year bond with an annual coupon rate of 9.5%. The bond has face value of \$1,000 and makes semiannual interest payments. If you require an 11.0% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? ____ 6. A 25-year, \$1,000 par value bond has an 8.5% annual coupon. The bond currently sells for \$875. If the yield to maturity remains at its current rate, what will the price be 5 years from now?...
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HW Chapter 5 final - 4 Garvin Enterprises bonds currently...

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