Exam 6: Bonds

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:

A firm issues 20-year bonds with a coupon rate of 4.8%,paid semi-annually.The credit spread for this firm's 20-year debt is 1.2%.New 20-year Treasury notes are being issued at par with a coupon rate of 4.6%.What should the price of the firm's outstanding 20-year bonds be if their face value is $1000?

What is the coupon rate of a two-year,$10,000 bond with semi-annual coupons and a price of $9543.45,if it has a yield to maturity of 6.8%?

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 BBB corporate bond is closest to:

Which of the following bonds is trading at par?

What rating must Luther receive on these bonds if they want the bonds to be issued at par?

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:

How are the cash flows of a zero-coupon bond different from those of a coupon bond?

Which of the following risk-free,zero-coupon bonds could be bought for the lowest price?

What is the coupon rate of a 30-year,$1000 bond with semi-annual payments of $22.50?

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 price of the bonds will be closest to:

Why is the yield to maturity of a zero-coupon,risk-free bond that matures at the end of a given period the risk-free interest rate for that period?

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): -The yield to maturity for the two-year zero-coupon bond is closest to:

What is the yield to maturity of a ten-year,$1000 bond with a 5.2% coupon rate and semi-annual coupons if this bond is currently trading for a price of $884?

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 semi-annually. -How much are each of the semi-annual coupon payments? Assuming the appropriate YTM on the Sisyphean bond is 8.8%,then at what price should this bond trade for?

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): -The yield to maturity for the five-year zero-coupon bond is closest to:

The above table provides information on a coupon bond that has annual coupon payments.What is the face value of this bond?

A risk-free,zero-coupon bond with a face value of $1,000 has 15 years to maturity.If the YTM is 5.8%,which of the following would be closest to the price this bond will trade at?

Using the information in the above table,which bond trades at the greatest premium to par value if the interest rate is 3.5%?

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 semi-annually. -Assuming the appropriate YTM on the Sisyphean bond is 9.0%,then the price that this bond trades for will be closest to: