Exam 8: Interest Rates and Bond Valuation

Jackson's has $1,000 face value,zero-coupon bonds outstanding that mature in 13.5 years.What is the current value of one of these bonds if the market rate of interest is 7.6 percent? Assume semiannual compounding.

Guggenheim offers a bond with annual payments and a coupon rate of 5 percent.The yield to maturity is 5.62 percent and the maturity date is 9 years away.What is the market price of one $1,000 face value bond?

The market price of a bond increases when the:

The stated interest payment,in dollars,made on a bond each period is called the bond's:

A firm offers a zero coupon bond with a face value of $1,000 that matures in 10 years.What is the current market price if the yield to maturity is 7.6 percent,given semiannual compounding?

A $1,000 par value bond carries a coupon rate of 6.5 percent and has a yield to maturity of 7.29 percent.The inflation rate is 3.13 percent.What is the bond's real rate of return?

The 5-year bond of XYZ Corp.has a bid quote of 131.2891 and an asked quote of 131.3047.Assume you purchase one of these bonds with a face value of $5,000 and a coupon rate of 7.4 percent,paid semiannually.The next interest payment will be paid two months from today.What will be your invoice price for this purchase?

What is the value of a 20-year,zero-coupon bond with a face value of $1,000 when the market required rate of return is 9.6 percent,compounded semiannually?

Currently,you own a municipal bond with a yield to maturity of 4.86 percent.If you are in the 24 percent tax bracket,what is your equivalent corporate tax rate? Ignore state taxes.

The ________ premium is that portion of the bond yield that represents compensation for potential difficulties that might be encountered should the bond holder wish to sell the bond prior to maturity.

A zero coupon bond with a face value of $1,000 is issued with an initial price of $430.84 based on semiannual compounding.The bond matures in 20 years.What is the implicit interest,in dollars,for the first year of the bond's life?

Otto Enterprises has a bond issue outstanding with a coupon of 8 percent that matures in 15 years.The bond is currently priced at $923.60 and has a par value of $1,000.Interest is paid semiannually.What is the yield to maturity?

A zero coupon bond:

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

A bond with a face value of $1,000 that sells for $1,000 in the market is called a ________ bond.

A $1,000 face value coupon bond will pay 5 percent interest annually for 12 years.What is the percentage change in the price of this bond if the market yield rises to 6 percent from the current level of 5.5 percent?

Stu wants to earn a real return of 3.4 percent on any bond he acquires.The inflation rate is 2.8 percent.He has determined that a particular bond he is considering should have an interest rate risk premium of .27 percent,a liquidity premium of .08 percent,and a taxability premium of 1.69 percent.What nominal rate of return is Stu demanding from this particular bond?

The interest rate for a tax-exempt bond that equates to the rate paid on a taxable bond is computed as:

A corporate bond has a coupon rate of 5.5 percent,a $1,000 face value,and matures three years from today.The corporation is in a serious financial situation and has announced that no future annual interest payments will be paid and that the probability the entire face value will be repaid is only 75 percent.If the entire face value cannot be paid,then 60 percent of the face value will be repaid.All payments will be made three years from now.What is the current value of this bond at a discount rate of 15 percent?

Casey just purchased a $1,000 face value bond at an invoice price of $1,288.16.The bond has a coupon rate of 6.2 percent,semiannual interest payments,and the next interest payment occurs one month from today.Of the amount paid for the bond,what was the dollar amount of the accrued interest?