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Chapter 8 Q2 Q3 Q4 Q8

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Chapter 8

QUESTIONS and PROBLEMS

2. Valuing Bonds – Microhard has issued a bond with the following characteristics:
Par: $1,000
Time to Maturity: 15 years
Coupon Rate: 7 percent
Semiannual payments
Calculate the price of this bond if the YTM is:
a. 7 percent
b. 9 percent
c. 5 percent

3. Bond Yields - Walters Umbrella Corp. issued 15-year bonds 2 years ago at a coupon rate of 6.4 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

4. Coupon Rates – Rhiannon Corporation has bonds on the market with 11.5 years to maturity, a YTM of 7.6 percent, and a current price of $1,060. The bonds make semiannual payments. What must the coupon rate be on these bonds?

8. Inflation and Nominal Returns – Suppose the real rate is 2.4 percent and the inflation rate is 3.1 percent. What rate would you expect to see on a treasury bill?

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