BUS 320 Chapter 7 Assignment
1)
A bond has a $1,000 par value, 10 years to maturity, a 6% coupon and sells for
$960.
a)
What is its current yield?
b)
What is its yield to maturity (YTM)?
c)
Assume that the yield to maturity remains constant for the next 4 years.
What will the price be 4 years from today?
2)
Newton Corporation’s outstanding bonds have a $1,000 par value, a 7%
semiannual coupon, 9 years to maturity and an 8.2 % YTM.
What is the bond’s
price?
3)
A firm’s bonds have a maturity of 10 years with a $1,000 face value, a 9%
semiannual coupon, are callable in 6 years at $1,090 and currently sell at a price
of $1,120.
What are their yield to maturity and their yield to call?
What return
should investors expect to earn on this bond?
4)
An investor has two bonds in his or her portfolio, Bond C and Bond Z.
Each
matures in 4 years, has a face value of $1,000 and has a yield to maturity of 8.2%.
Bond C pays a 10% annual coupon while Bond Z is a zero coupon bond.
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 Winter '08
 sloan
 Management, Bond Z

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