Chapter 9
1.
A corporate bond has a coupon rate of 8%, payable semiannually, a maturity of 20 years, and
a yield to maturity of 9%. How much should you pay for this bond?
a.
$1080
b.
$1000
c.
$966
d.
$908
1. d
PMT = 40, FV = 1000, I/Y = 4.5, n = 40, CPT PV = -908
2.
An annual coupon bond issue has a coupon rate of 8% and 10 years maturity. Determine this
bond's current yield if its yield to maturity is 7%.
a.
7.5%
b.
7.9%
c.
8.3%
d.
8.8%
2. a
FV = 1000, PMT = 80, N = 10, I/Y = 7, CPT PV = 1070.23, current yield = 80/1070.23 =
7.5%
3.
A semiannual coupon bond is currently selling for $1,142.12. The bond has a maturity of 10
years and a yield to maturity of 7%. Determine the coupon rate of the bond.
a.
6%
b.
7%
c.
8%
d.
9%
3. d
FV = 1000, I/Y = 3.5, N = 20, PV = -1142.12, CPT PMT = 45, Annual pmt = 90, coupon rate =
90/1000 = 9%.
4.
A corporate bond has an annual coupon rate of 8%, payable semiannually, and a maturity of
25 years. Determine the bond's yield to maturity if its current yield is 6.36%.
a.
3%
b.
6%
c.
8%
d.
9%
4. b
CY = 6.36%, PV (or price) = 80/0.0636 = 1257.86,
FV = 1000, n = 50, PMT = 40, PV = -1257.86, CPT I/Y = 3, YTM = 6%
5.
You just purchased an annual coupon bond for $817.84. The bond has a maturity of 15 years,
a face value of $1,000, a coupon rate of 5%, and a yield to maturity of 7%. What is the bond's
total rate of return for the year if the interest rate increases to 7.5% one year later?
a.
9.79%
b.
7.50%
c.
3.75%