Exam 7: Valuing Bonds

A 3.25 percent TIPS has an original reference CPI of 194.1.If the current CPI is 210.3,what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.)

Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent.(Assume semi-annual compounding and $1,000 par value.)

Consider a 3.25 percent TIPS with an issue CPI reference of 186.7.At the beginning of this year,the CPI was 197.5 and was at 202.4 at the end of the year.What was the capital gain of the TIPS in dollars? (Assume semi-annual interest payments and $1,000 par value.)

A 3.25 percent coupon municipal bond has 12 years left to maturity and has a price quote of 98.75.The bond can be called in five years.The call premium is one year of coupon payments.What is the bond's taxable equivalent yield for an investor in the 35 percent marginal tax bracket? (Assume interest payments are paid semi-annually and a par value of $5,000.)

A 7.25 percent coupon bond with 25 years left to maturity is priced to offer a 7 percent yield to maturity.You believe that in one year,the yield to maturity will be 7.15 percent.If this occurs,what would be the total return of the bond in percent? (Assume semi-annual interest payments and $1,000 par value.)

Which of the following is a true statement?

An 8 percent coupon municipal bond has 15 years left to maturity and has a price quote of 102.0.The bond can be called in 6 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.

Which of the following is a reason municipal bonds offer lower rates of interest income for their investors?

Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

A bond with 14 years to maturity is selling for $1,070 and has a yield to maturity of 10.06 percent.If this bond pays its coupon payments semi-annually and par value is $1,000,what is the bond's annual coupon rate?

Investment grade bonds include those bonds with ratings:

A 4.75 percent coupon bond with 12 years left to maturity can be called in two years.The call premium is one year of coupon payments.It is offered for sale at $1037.35.What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and par value is $1,000.)

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.)

Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually),4.75 percent coupon Treasury note,and a corporate zero coupon bond maturing in 15 years.(Assume a $1,000 par value.)

Which of the following are backed only by the reputation and financial stability of the corporation?

Which of the following is another name for junk 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.

All of the following items would need to be included in the bond's indenture agreement EXCEPT:

Which of the following was the catalyst for the recent financial crisis?

Junk bonds are those bonds with a credit rating of: