Bond calculations

1. Determine the value of a $1,000 denomination Bell South bond with a 7 percent coupon rate maturing in 20 years for an investor whose required rate of return is:

a. 8 percent
b. 7 percent
c. 5 percent

2. Consider Allied Signal Corporation's 9 7/8 percent bonds that mature on June 1, 2010. Assume that the interest on these bonds is paid and compounded annually. Determine the value of a $1,000 denomination Allied Signal Corporation bond as of June 1, 2004, to an investor who holds the bond until maturity and whose required rate of return is:

a. 7 percent
b. 9 percent
c. 11 percent
d. What would be the value of the Allied Signal Corporation bonds at an 8 percent required rate of return if the interes were paid and compounded semiannually.

3. Southern Bell has issued 4 3/8 percent bonds that mature on August 1, 2011. Assume that interest is paid and compounded annually. Determine the yield to maturity if an investor purchases a $1,000 denomination bond for $853.75 on August 1, 2004.

4. Consider the Allied Signal Corporation zero coupon money multiplier notes for 2008. The bonds were issued on July 1, 1990, for $100. Interest is paid every July 1 and the bond matures on July 1, 2008. Determine the yield to maturity if the bonds are purchased at the:

a. Issue price in 1990
b. Market price as of July 1, 2004, of 750
c. Explain why the returns calculated in (a) and (b) are different

5. If you purchase a zero coupon bond today for $225 and it matures at $1000 in 11 years, what rate of return will you earn on that bond (to the nearest 10th of 1 percent)?