Bonds & Inflation Practice Problems - FIN 300 Un-graded Practice HW(Chapter 8 Bonds Chapter 2 Inflation 1(Semi-annual coupon bond price Given the

Bonds & Inflation Practice Problems - FIN 300 Un-graded...

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FIN 300 Un-graded Practice HW (Chapter 8: Bonds & Chapter 2: Inflation) 1. (Semi-annual coupon bond price) Given the following information about a corporate bond, calculate the fair market price: Face/Par Value = $1000 Coupons paid semi-annually Coupon rate = 12% 15 years left to maturity Yield-to-maturity (YTM) = 10% 2. (Semi-annual coupon bond price) For the bond in Problem #1, what would the price be if the YTM = 13%? What would the price be if the YTM were 12%? 3. (Semi-annual coupon bond price vs. maturity) For the bond in Problem #1 (w/YTM=10%), what would be the price when there is 5 years left to maturity – assuming the YTM doesn’t change? Do the same analysis for YTM’s = 13% and 12%, respectively. What does this tell us about the sensitivity of price to changes in YTM for bonds with differing maturities? 4. (Annual coupon bond price) Assume a bond with all of the specified characteristics of the one in Problem #1 except that the coupons are paid annually. What would be the price?
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  • Fall '08
  • Olander
  • Corporate Finance, YTM, semi-annual coupon bond, Coupon Bond Price

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