Exam3_solution_Spring2009 - Business Finance Exam 3...

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Spring2009 Student Name: 1 The Carter Company's bonds mature in 10 years, have a par value of $1,000 and a coupon rate of 11%. The market interest rate for the bonds is 9%. What is the price of these bonds? a. $935.82 b. $941.51 c. $958.15 d. $1,128.35 * e. $1,280.94 2. Brown Enterprises’ bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $90, and a par value of $1,000. What is their yield to maturity? a. 7.61% b. 8.59% * c. 9.00% d. 9.10% e. 9.20% 3. Leggio Corporation issued 20-year, 7% annual coupon bonds at their par value of $1,000 one year ago. Today, the market interest rate on these bonds has dropped to 5%. What is the price of the bonds today? a. $1,046.59 b. $1,111.58 c. $1,133.40 d. $1,177.78 e. $1,241.71 * 4. Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The going interest rate is 6%, based on semiannual compounding. What is the bond’s price? a. $1,008.65 b. $1,024.67 c. $1,051.34 d. $1,098.00 * e. $1,105.78 5. A 20-year, $1,000 par value bond has a 9% annual coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price after 6 years? a. $933.09 b. $935.22 * c. $961.82 d. $965.84 e. $978.40 6. Moussawi Ltd's outstanding bonds have a $1,000 par value, and they mature in 5 years. Their yield to maturity is 9%, based on semiannual compounding, and the current market price is $853.61. What is the bond's annual coupon interest rate? 1
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Exam3_solution_Spring2009 - Business Finance Exam 3...

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