Exam 6: Bonds

Consider a zero-coupon bond with a $1000 face value and 15 years left until maturity. If the bond is currently trading for $431, then the yield to maturity on this bond is closest to ________.

What is the yield to maturity of a one-year, risk-free, zero-coupon bond with a $10,000 face value and a price of $9400 when released?

Which of the following bonds is trading at a premium?

What care, if any, should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

A bond has a $10,000 face value, ten years to maturity, and 8% semiannual coupon payments. What would be the expected difference in this bond's price immediately before and immediately after the next coupon payment?

The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): Based upon the information provided in the table above, you can conclude ________.

Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1,000 and a coupon rate of 6.0% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: Assuming that Luther's bonds receive a AA rating, the price of the bonds will be closest to ________.

Why is the yield to maturity of a zero-coupon, risk-free bond that matures at the end of a given period the risk-free interest rate for that period?

Which of the following bonds will be most sensitive to a change in interest rates?

A firm issues two-year bonds with a coupon rate of 6.7%, paid semiannually. The credit spread for this firm's two-year debt is 0.8%. New two-year Treasury notes are being issued at par with a coupon rate of 3.1%. What should the price of the firm's outstanding two-year bonds be per $100 of face value?

The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the two year, zero-coupon, risk-free bond shown?

Use the figure for the question(s) below. -The current zero-coupon yield curve for risk-free bonds is shown above. What is the risk-free interest rate on a 4-year maturity?

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually. If market interest rates imply a YTM of 8%, which of the following coupon rates will cause the bond to be issued at a premium?

An investor holds a Ford bond with a face value of $5000, a coupon rate of 8.5%, and semiannual payments that matures on January 15, 2029. How much will the investor receive on January 15, 2029?

Bond traders generally quote bond yields rather than bond prices, since yield to maturity depends on the face value of the bond.

Use the information for the question(s) below. -Which of the following best describes a bond rated by Standard & Poor's and Moody as B?

A bond is said to mature on the date when the issuer repays its notional value.

A bond has five years to maturity, a $1000 face value, and a 5.5% coupon rate with annual coupons. What is its yield to maturity if it is currently trading at $846.11?

An investor purchases a 30-year, zero-coupon bond with a face value of $5000 and a yield to maturity of 8.4%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change?

A mining company needs to raise $100 million in order to begin open-pit mining of a coal seam. The company will fund this by issuing 30-year bonds with a face value of $1,000 and a coupon rate of 6.5%, paid annually. The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings. If the company's bonds are rated A, what will be their selling price?