honeycfa

A bond with a 12% coupon, 10 years to maturity and selling at 88 has a yield to maturity of:

A) over 14%.

B) between 13% and 14%.

C) between 10% and 12%.

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PMT = 120; N = 10; PV = -880; FV = 1,000; CPT → I = 14.3

honeycfa

What value would an investor place on a 20-year, $1,000 face value, 10% annual coupon bond, if the investor required a 9% rate of return?

A) $920.

B) $1,091.

C) $879.

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N = 20; I/Y = 9; PMT = 100 (0.10 × 1,000); FV = 1,000; CPT → PV = 1,091.

honeycfa

Today an investor purchases a $1,000 face value, 10%, 20-year, semi-annual bond at a discount for $900. He wants to sell the bond in 6 years when he estimates the yields will be 9%. What is the estimate of the future price?

A) $1,152.

B) $1,079.

C) $946.

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In 6 years, there will be 14 years (20 ? 6), or 14 × 2 = 28 semi-annual periods remaining of the bond's life So, N = (20 ? 6)(2) = 28; PMT = (1,000 × 0.10) / 2 = 50; I/Y = 9/2 = 4.5; FV = 1,000; CPT → PV = 1,079.

Note: Calculate the PV (we are interested in the PV 6 years from now), not the FV.

honeycfa

An investor purchased a 6-year annual interest coupon bond one year ago. The coupon rate of interest was 10% and par value was $1,000. At the time she purchased the bond, the yield to maturity was 8%. The amount paid for this bond one year ago was:

A) $1,092.46.

B) $1,125.53.

C) $1,198.07.

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N = 6
PMT = (0.10)(1,000) = 100
I = 8
FV = 1,000
PV = ?
PV = 1,092.46

honeycfa

A bond with a face value of $1,000 pays a semi-annual coupon of $60. It has 15 years to maturity and a yield to maturity of 16% per year. What is the value of the bond?

A) $697.71.

B) $774.84.

C) $832.88.

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FV = 1,000; PMT = 60; N = 30; I = 8; CPT → PV = 774.84

honeycfa

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. What is the value of the bond today if the coupon rate is 8%?

A) $922.78.

B) $1,221.17.

C) $1,144.31.

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FV = 1,000; N = 10; PMT = 40; I = 5; CPT → PV = 922.78.

honeycfa

A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. What is the value of the bond today if the coupon rate is 12%?

A) $927.90.

B) $1,075.82.

C) $1,077.22

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FV = 1,000
N = 5
I = 10
PMT = 120
PV = ?
PV = 1,075.82.

honeycfa

Value a semi-annual, 8% coupon bond with a $1,000 face value if similar bonds are now yielding 10%? The bond has 10 years to maturity.

A) $1,373.87.

B) $875.38.

C) $1,000.00.

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Using the financial calculator: N = 10 × 2 = 20; PMT = $80/2 = $40; I/Y = 10/2 = 5%; FV = $1,000; Compute the bond’s value PV = $875.38.

honeycfa

What value would an investor place on a 20-year, 10% annual coupon bond, if the investor required an 11% rate of return?

A) $879.

B) $1,035

C) $920.

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N = 20, I/Y = 11, PMT = 100, FV = 1,000, CPT PV

honeycfa

What value would an investor place on a 20-year, 10% annual coupon bond, if the investor required a 10% rate of return?

A) $1,104.

B) $1,000.

C) $920.

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N = 20; I/Y = 10; PMT= 100; FV = 1,000; CPT → PV = 1,000