Bonds - Sample ProblemsBonds 1. Consider a $1,000 par value...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Sample Problems—Bonds 1. Consider a $1,000 par value bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the current yield on the bond assuming that the required return on the bond is 10 percent? 2. Assume that you wish to purchase a 20-year bond that has a maturity value of $1,000 and makes semi- annual interest payments of $40. If you require an annual 10 percent rate of return on this investment, what is the maximum price you should be willing to pay for the bond? 3. Suppose Ford Motor Company sold an issue of bonds with a 12-year maturity, a $1,000 par value, a 12% coupon rate. Two years after the bonds were issued, the going rate of interest on bonds such as these had risen to 14 percent. At what price would the bonds sell? 4. Delta Corporation has a bond issue outstanding with an annual coupon interest rate of 9 percent and 4 years remaining until maturity. The par value of the bond is $1,000.What is the current yield of the Delta Corporation bond is the bond currently sells for $713.75? 5. Suppose Ford Motor Company have 10 years remaining to maturity. Interest is paid annually; the bonds have a $1,000 par value; and the coupon interest rate is 12 percent. Compute the yield to maturity for the bonds if the current market price is $910. 6. What is the value of an Orion bond that has a 10 percent annual coupon, pays interest semiannually, and has 10 years to maturity, if the annual required rate of return is 12 percent? 7.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Bonds - Sample ProblemsBonds 1. Consider a $1,000 par value...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online