Exam 7: Valuing Bonds

Bond Prices and Interest Rate Changes A 5.5 percent coupon bond with 18 years left to maturity is priced to offer a 6.25 percent yield to maturity.You believe that in one year,the yield to maturity will be 5.75 percent.What is the change in price the bond will experience in dollars? (Assume semi-annual interest payments and $1,000 par value.)

Which of the following issues Treasury Inflation Protected Securities (TIPS)?

Under what conditions is a bond likely to be called?

Yield to Call A 7.25 percent coupon bond with 25 years left to maturity can be called in five years.The call premium is one year of coupon payments.It is offered for sale at $1,066.24.What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and par value is $1,000.)

Which of the following is true regarding U.S.Government Agency Securities?

Interest Payments Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually),6.45 percent coupon Treasury note,and a corporate zero coupon bond maturing in 10 years.(Assume a $1,000 par value.)

Call Premium A 5.5 percent corporate coupon bond is callable in four years for a call premium of one year of coupon payments.Assuming a par value of $1,000,what is the price paid to the bondholder if the issuer calls the bond? (Assume annual interest payments.)

Rank from highest credit risk to lowest credit risk the following bonds,with the same time to maturity,by their yield to maturity: Treasury bond with yield of 6.55 percent,IBM bond with yield of 10.95 percent,Trump Casino bond with a yield of 9.15 percent,and Banc Ono bond with a yield of 9.46 percent.

A 6.5 percent coupon bond with 12 years left to maturity can be called in four years.The call premium is one year of coupon payments.It is offered for sale at $1,190.25.What is the yield to call of the bond? (Assume interest payments are paid semi-annually and par value is $1,000.)

Which of the following bonds will have the largest percentage increase in value if interest rates decrease by 1 percent?

A 7 percent coupon bond has 10 years to maturity and could be called in three years.If the bond is called,investors will earn 5.5 percent.The call premium is one year of coupon payments.If coupon payments are made semi-annually and par value is $1,000,what is the bond's yield to maturity?

Sally is choosing between two bonds both of which mature in 15 years and have the same level of risk.Bond A is a municipal bond that yields 5.75 percent.Bond B is a corporate bond that yields 7.75 percent.If Sally is in the 28 percent tax bracket,which bond should she select and why?

Sally is choosing between two bonds both of which mature in 15 years and have the same level of risk.Bond A is a municipal bond that yields 7.20 percent.Bond B is a corporate bond that yields 10.00 percent.If Sally is in the 28 percent tax bracket,which bond should she select and why?

Yield to Maturity A 5.75 percent coupon bond with 12 years left to maturity is offered for sale at $978.83.What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1,000.)

Which of the following determines the dollar amount of interest paid to bondholders?

Interest Payments Determine the interest payment for the following three bonds: 2.5 percent coupon corporate bond (paid semi-annually),3.15 percent coupon Treasury note,and a corporate zero coupon bond maturing in 10 years.(Assume a $1,000 par value.)

Which of the following statements is correct?

Taxable Equivalent Yield What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?

Call Premium A 6 percent corporate coupon bond is callable in 10 years for a call premium of one year of coupon payments.Assuming a par value of $1,000,what is the price paid to the bondholder if the issuer calls the bond?

Compute Bond Price Compute the price of a 6 percent coupon bond with 10 years left to maturity and a market interest rate of 8.75 percent.(Assume interest payments are semi-annual and par value is $1,000.)Is this a discount or premium bond?