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Bond Valuation

A corporate bond has a coupon rate of 8%, payable semiannually, a maturity of 20 years, and a yield to maturity of 9%. How much should you pay for this bond?
A) $1,080
B) $1,000
C) $966
D) $908

2.
An annual coupon bond issue has a coupon rate of 8% and 10 years maturity. Determine this bond's current yield if its yield to maturity is 7%.
A) 7.5%
B) 7.9%
C) 8.3%
D) 8.8%

3. You just purchased an annual coupon bond for $817.84. The bond has a maturity of 15 years, a face value of $1,000, a coupon rate of 5%, and a yield to maturity of 7%. What is the bond's total rate of return for the year if the interest rate increases to 7.5% one year later?
A) 9.79%
B) 7.50%
C) 3.75%
D) 2.44%

Solution Preview

A corporate bond has a coupon rate of 8%, payable semiannually, a maturity of 20 years, and a yield to maturity of 9%. How much should you pay for this bond?
A) $1,080
B) $1,000
C) $966
D) $908

2.
An annual coupon bond issue has a coupon rate of 8% and 10 years maturity. Determine this bond's current yield if its yield to maturity is 7%.
A) 7.5%
B) 7.9%
C) 8.3%
D) 8.8%

3. You just purchased an annual coupon bond for $817.84. ...

Solution Summary

This solution is comprised of a detailed explanation to calculate the bond prices.

$2.19