Exam 8: Interest Rates and Bond Valuation

The Lo Sun Corporation offers a 8% bond with a current market price of $875.05. The yield to maturity is 9.18%. The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures?

The principal amount of a bond that is repaid at the end of the loan term is called the bond's:

If its yield to maturity is less than its coupon rate,a bond will sell at a _____,and increases in market interest rates will _____.

Consider a bond which pays 8% semiannually and has 8 years to maturity. The market requires an interest rate of 10% on bonds of this risk. What is this bond's price?

The relationship between nominal rates,real rates,and inflation is known as the:

All else constant,a bond will sell at _____ when the yield to maturity is _____ the coupon rate.

Moonhigh,Inc. has a 5%,semiannual coupon bond with a current market price of $988.52. The bond has a par value of $1,000 and a yield to maturity of 5.29%. How many years is it until this bond matures?

Aspens is preparing a bond offering with an 8% coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this,which of the following statements are correct? I. The initial selling price of each bond will be $1,000. II. After the bonds have been outstanding for 1 year,you should use 9 as the number of compounding periods when calculating the market value of the bond. III. Each interest payment per bond will be $40. IV. The yield to maturity when the bonds are first issued is 8%.

The "EST SPREAD" shown in The Wall Street Journal listing of corporate bonds represents the estimated:

Moonhigh,Inc. has a 6%,semiannual coupon bond with a current market price of $988.52. The bond has a par value of $1,000 and a yield to maturity of 6.31%. How many years is it until this bond matures?

Guggenheim,Inc. offers a 9% coupon bond with annual payments. The yield to maturity is 8.13% and the maturity date is 9 years. What is the market price of a $1,000 face value bond?

Why do corporations issue 100-year bonds,knowing that interest rate risk is highest for very long-term bonds? How does the interest rate risk affect the issuer?

All else constant,a coupon bond that is selling at a premium,must have:

The bonds of Jerrod's Welding,Inc. pay an 8% coupon,have a 7.98% yield to maturity and have a face value of $1,000. The current rate of inflation is 2.5%. What is the real rate of return on these bonds?

A bond that makes no coupon payments and is initially priced at a deep discount is called a _____ bond.

Face value is:

A bond is listed in The Wall Street Journal as a 12 3/4s of July 2009. This bond pays:

You own a bond that has a 7% coupon and matures in 12 years. You purchased this bond at par value when it was originally issued. If the current market rate for this type and quality of bond is 7.5%,then you would expect:

The total interest paid on a zero-coupon bond is equal to:

The discussion of asset pricing in the text suggests that an investor will be indifferent between two bonds which have equal yields to maturity as long as they have equivalent default risk. Can you think of any real-world factors which might make a given investor prefer one of these bonds over the other?