KIC000057 - I \ cfw_ ,L-_-L-~-~ ~ - - -~ Finance 320...

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Finance 320 Problem Set #8 1. You wish to purchase a 20-year bond that has a maturity value ofSlooo and makes semi-annual interest payments of $40. If you require a 10% yield to maturity on this investment, what is the maximum price you would pay for the bond? 2. You can purchase a S1000 face value bond with 15 years to maturity for $1124. The bond pays a semi-annual coupon. The market requires a return of 8% on similar bonds. What is the coupon rate? 3. Suppose you read in the Wall Street Journal that a bond with face value S100 has an annual coupon rate of 9% and a price of$71. What is the bond's current yield? 4. Moe's Inc. has bonds outstanding with a par value of S1000 and 10 years 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 on the issue. 5.
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This note was uploaded on 09/07/2011 for the course FINANCE 320 taught by Professor Sapp during the Fall '10 term at Iowa State.

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KIC000057 - I \ cfw_ ,L-_-L-~-~ ~ - - -~ Finance 320...

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