1. Determine the current market prices of the following $1,000 bonds if the comparable rate is 10% and answer the following questions.

XY 5.25%, (interest paid annually) for 20 years.
AB 14 %, (interest paid annually) for 20 years.

a. Which bond has a current yield that exceeds the yield to maturity?

b. Which bond may you expect to be called? Why?

c. If CD, Inc. has a bond with a 5ΒΌ percent coupon and a maturity of 20 years but which was lower rated, what would be its price relative to the XY, Inc., bond? Explain.

2. You purchase a bond for $875. It pays $80 a year (that is, the semiannual coupon is 4%), and the bond matures after 10 years. What is the yield to maturity?

Solution Preview

Please see the attached file.

1. The current price of the bonds would be the present value of interest and principal discounted at the rate of 10%. Interest is an annuity and so we would use the PVIFA table to get the PV factor. For principal amount which is a lump sum we would use the PVIF table.

Bond XY - Annual interest is $52.5, par value is $1,000, maturity is 20 years and the discounting rate is 10%
Price of XY = 52.5 X PVIFA (10%, 20) + 1,000 X PVIF (10%, 20)
Price of XY = 52.5 X 8.5136 ...

Solution Summary

The solution explains some bond questions relating to current market price, current yield, YTM, when will it be called

Assume coupons are paid annually. Here are the prices of three bonds with 10-year maturities:
Bond Coupon (%) Price (%)
2 81.62
4 98.39
8 133.42
________________________________________
a. What is the yield to maturity fo

A $1,000 par value bond pays $50 in interest every six months. What will be the value of the bond if it matures in 30 months and the yield-to-maturity of similar risk bonds is 8%?

Show work for all 3 questions in a word document.
Show work for all 3 questions in a word document.
A bond has a $1000 face value, a market price of $1,115, and pays interest payments of $90 every year. What is the coupon rate?
A 7 percent bond has a yield to maturity of 6.75 percent, 10 years to maturity, a face value

8.4 Assume the yield curve on "plain vanilla" default-free bonds is flat at 5%, and you are thinking of buying a default-free bond. Specifically, you're thinking of buying a bond issued by Risklessco, a company considered to be default-free by all major bond rating firms.
You will select one of the following three bonds, all

See the attached file.
Only
question 1 (a-d)
question 6 (a-d)
a. What is the company's average annual rate of sales growth from 2006 through 2008?
b. How long, on average, was Better Mouse Trap taking to collect on its receivable accounts in 2008? (Assume all of the company's sales were on credit.)
c. Was Better Mo

The initial proceeds per bond, the size of the issue, the initial maturity of the bond, and the years remaining to maturity are shown in the following table for a number of bonds. In each case, the firm is in the 40 percent tax bracket, and the bond has a $1,000 par value.
Bond Proceeds per bond Size of issue Ini

The Allison Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years and Bond S has a maturity of one year. Interest is paid annually.
A) What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 7 perce

If you looked at the bond trading pages online or in the newspaper and saw a bond price quote for a $1,000 par value bond of "96.500" you would know the actual dollar price of the bond was:

1) Assuming that it has similar molecular orbital energies to those of carbon monoxide, deduce the bond order of the NO+ ion.
2) construct electron-dot diagrams for
a) oxygen difluoride
b) phosphorus trichloride
c) xenon difluoride
d) tetrachloroiodate ion, ICl4^-
3) Construct an electron-dot diagram for th