Exam 6: Valuing Bonds

Use the table for the question(s)below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): -Compute the yield to maturity for each of the five zero-coupon bonds.

Which of the following statements is FALSE?

Use the following information to answer the question(s)below. -Consider a five-year,default-free bond with an annual coupon rate of 5% and a face value of $1000.The YTM on this bond is closest to:

Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons,a coupon rate of 5%,and a face value of $1000.Wyatt Oil believes it can get a AAA rating from Standard and Poor's for this bond issue.If Wyatt Oil is successful in getting a AAA rating,then the issue price for these bonds would be closest to:

Use the information for the question(s)below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -What rating must Luther receive on these bonds if they want the bonds to be issued at par?

Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:

The YTM of a 4-year default-free security with a face value of $1000 and an annual coupon rate of 5.25% is closest to:

Use the table for the question(s)below. Consider the following zero-coupon yields on default-free securities: -The forward rate for year 4 (the forward rate quoted today for an investment that begins in three years and matures in four years)is closest to:

Which of the following statements is FALSE?

Use the table for the question(s)below. Consider the following yields to maturity on various one-year zero-coupon securities: -The credit spread of the B corporate bond is closest to:

Sovereign debt is:

Use the information for the question(s)below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Suppose that when these bonds were issued,Luther received a price of $972.42 for each bond.What is the likely rating that Luther's bonds received?

Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity.If the bond is currently trading for $459,then the yield to maturity on this bond is closest to:

Use the information for the question(s)below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Assuming that Luther's bonds receive a AAA rating,the number of bonds that Luther must issue to raise the needed $25 million is closest to:

Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons,a coupon rate of 5%,and a face value of $1000.Wyatt Oil believes it can get a AAA rating from Standard and Poor's for this bond issue.What is the difference in the price the company will receive if the rating is BBB instead of AAA?

Consider a corporate bond with a $1000 face value,8% coupon with semiannual coupon payments,7 years until maturity,and a YTM of 9%.It has been 57 days since the last coupon payment was made and there are 182 days in the current coupon period.The dirty (cash)price for this bond is closest to:

Which of the following statements is FALSE?

Use the information for the question(s)below. The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years.The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. -Assuming that this bond trades for $1112,then the YTM for this bond is closest to:

Use the following information to answer the question(s)below. -The price today of a three-year default-free security with a face value of $1000 and an annual coupon rate of 4% is closest to:

Which of the following statements is TRUE?