Exam 7: Valuing Bonds

TIPS Interest and Par Value A 3.75 percent TIPS has an original reference CPI of 175.8.If the current CPI is 207.7,what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

Time to Maturity A bond issued by a corporation on June 15,2007,is scheduled to mature on June 15,2017.If today is December 16,2008,what is this bond's time to maturity? (Assume annual interest payments.)

If Zeus Energy bonds are upgraded from BBB- to BBB+,which of the following statements is true?

Explain how a bond's interest rate can change over time even if interest rates in the economy do not change.

Current Yield What's the current yield of an 8.15 percent coupon corporate bond quoted at a price of 94.30?

All else equal,which bond's price is more affected by a change in interest rates,a short-term bond or a longer-term bond? Why?

Calculate the price of a 6.5 percent coupon bond with 27 years left to maturity and a market interest rate of 5 percent.(Assume interest payments are semiannual and par value is $1,000.)Is this a discount or premium bond?

Compute Bond Price Compute the price of a 4.75 percent coupon bond with 15 years left to maturity and a market interest rate of 6.25 percent.(Assume interest payments are semi-annual and par value is $1,000.)Is this a discount or premium bond?

Comparing Bond Yields A client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that offers a 4.10 percent yield.Which bond will give the client more profit after taxes?

Taxable Equivalent Yield What's the taxable equivalent yield on a municipal bond with a yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket?

Which of the following statements is correct?

Which of the following are main issuers of bonds?

A corporate bond with a 5 percent coupon has 10 years left to maturity.It has had a credit rating of BBB and a yield to maturity of 8.0 percent.The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB.The new appropriate discount rate will be 9 percent.What will be the change in the bond's price in dollars? Assume interest payments are paid semi-annually and par value is $1,000.

Regarding a bond's characteristics,which of the following is the principal loan amount that the borrower must repay?

A 15-year bond with a 10 percent coupon has a yield to maturity of 8 percent.The bond could be called in four years and if called would generate a yield to call of 6 percent.What is this bond's call premium? Assume the coupon payments are made semi-annually and par value is $1,000.

Consider the following bond quote: a municipal bond quoted at 101.25.If the municipal bond has a par value of $5,000,what is the price of the bond in dollars?

Current Yield What's the current yield of a 5.75 percent coupon corporate bond quoted at a price of 103.05?

An 8 percent coupon municipal bond has 15 years left to maturity and has a price quote of 98.5.The bond can be called in six years.The call premium is one year of coupon payments.Compute the bond's yield to call and determine if the bond will be called.Assume interest payments are paid semi-annually and a par value of $5,000.

Current Yield What's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?

Describe reasons that the U.S.government and corporations would issue bonds.