Exam 6: Bonds

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 5.6% (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 number of bonds that Luther must issue to raise the needed $25 million is closest to ________.

What is the coupon payment of a 15-year $10,000 bond with a 9% coupon rate with semiannual payments?

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?

What issues should one be careful of when calculating the bond price from its yield to maturity using the "time value of money" (TVM) keys of a financial calculator?

A corporate bond makes payments of $9.67 every month for ten years with a final payment of $2009.67. Which of the following best describes this bond?

What is the yield to maturity of a(n) eight-year, $5000 bond with a 4.4% coupon rate and semiannual coupons if this bond is currently trading for a price of $4723.70?

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?

A corporate bond which receives a BBB rating from Standard & Poor's is considered ________.

Which of the following best illustrates why a bond is a type of loan?

Which of the following bonds is trading at a premium?

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

Use the information to answer the question(s) below. -Shown above is information from FINRA regarding one of Caterpillar Financial Services' bonds. How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid annually?

What is the coupon payment of a 25-year $1000 bond with a 4.5% coupon rate with quarterly payments?

Which of the following risk-free, zero-coupon bonds could be bought for the lowest price?

A firm issues 5-year bonds with a coupon rate of 4.7%, paid semiannually. The credit spread for this firm's 5-year debt is 1.2%. New 5-year Treasury notes are being issued at par with a coupon rate of 5.1%. What should the price of the firm's outstanding 5-year bonds be if their face value is $1,000?

Which of the following statements regarding bonds and their terms is FALSE?

Consider a zero-coupon bond with $100 face value and 15 years to maturity. If the YTM is 7.4%, this bond will trade at a price closest to ________.

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 8.0% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 11.1%, then the price that this bond trades for will be closest to ________.

Which of the following best shows the timeline for cash flows from a five-year bond with a face value of $2,000, a coupon rate of 5.0%, and semiannual payments?

The above table shows the yields to maturity on a number of two-year, zero-coupon securities. What is the credit spread on a two-year, zero-coupon corporate bond with a B rating?