KIC000057

# KIC000057 - I cfw,L-L-~-~ ~-~ Finance 320 Problem Set#8 1...

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Finance 320 Problem Set#8 1. You wish to purchase a20-year bond that has amaturity value ofSlooo and makes semi-annual interest payments of \$40. Ifyou require a 10%yield to maturity on this investment, what isthe maximum price you would pay for the bond? 2. You can purchase a S1000 face value bond with 15years to maturity for \$1124. The bond pays asemi-annual coupon. The market requires areturn of 8% on similar bonds. What is the coupon rate? 3. Suppose you read inthe Wall Street Journal that abond with facevalue S100has an annual coupon rate of 9% and a price of\$71. What isthe bond's current yield? 4. Moe's Inc. has bonds outstanding with a par value of S1000 and 10years to maturity. These bonds pay a coupon of\$45 every six months. Current market conditions are such that the bond sells for \$938. Calculate the yield to maturity onthe issue. 5. Four years agoyou bought a SIOOOpar value, Io-year bond that pays interest annually. The bond has acoupon rate of 10%.However, this bond was callable atthe end ofyear 5at aprice of\$1200. The bond iscurrently
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