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Describing the Features of the Bond

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September. The bonds are investment grade and sell at par. The bonds are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus 0.50 percent. Which of the following correctly describe the features of this bond?
I. bond rating of B
II. "make whole" call price
III. $1,000 face value
IV. offer price of $1,000Question 11 options:
1) I and III only
2) I, III, and IV only
3) II, III, and IV only
4) III and IV only
5) I, II, III, and IV

Today, you want to sell a $1,000 face value zero coupon bond you currently own. The bond matures in 4.5 years. How much will you receive for your bond if the market yield to maturity is currently 5.33 percent? Ignore any accrued interest.Question 14 options:
1) $789.22
2) $756.14
3) $741.08
4) $698.09
5) $696.60

Redesigned Computers has 5.25 percent coupon bonds outstanding with a current market price of $546.19. The yield to maturity is 16.28 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until these bonds mature?Question 15 options:
1) 14.16 years
2) 28.32 years
3) 7.08 years
4) 12.41 years
5) 6.64 years
Oil Well Supply offers 7.5 percent coupon bonds with semiannual payments and a yield to maturity of 7.68 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?Question 16 options:
1) $1,013.48
2) $991.47
3) $989.70
4) $996.48
5) $1,002.60

Roadside Markets has a 6.75 percent coupon bond outstanding that matures in 10.5 years. The bond pays interest semiannually. What is the market price per bond if the face value is $1,000 and the yield to maturity is 6.69 percent?Question 17 options:
1) $1,004.47
2) $999.80
3) $999.85
4) $1,007.52
5) $1,003.42

The 7 percent, semi-annual coupon bonds offered by House Renovators are callable in 2 years at $1,054. What is the amount of the call premium on a $1,000 par value bond?Question 18 options:
1) $89
2) $72
3) $84
4) $54
5) $52

Global Communications has a 7 percent, semiannual coupon bond outstanding with a current market price of $1,023.46. The bond has a par value of $1,000 and a yield to maturity of 6.72 percent. How many years is it until this bond matures? Question 20 options:
1) 12.26 years
2) 12.53 years
3) 18.49 years
4) 24.37 years
5) 25.05 years.

Solution Preview

Please see the attachment.

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March
and September. The bonds are investment grade and sell at par. The bonds are callable at
a price equal to the present value of all future interest and principal payments discounted
at a rate equal to the comparable Treasury rate plus 0.50 percent. Which of the following
correctly describe the features of this bond?
I. bond rating of B
II. "make whole" call price
III. $1,000 face value
IV. offer price of $1,000Question 11 options:
1) I and III only
2) I, III, and IV only
3) II, III, and IV only
4) III and IV only
5) I, II, III, and IV

Since the bonds are investment grade they can be B rated
Since the call price is PV of interest and principal this is a make whole provision
Since the bonds sell at par so price is equal to face value of $1,000

Today, you want to sell a $1,000 face value zero coupon bond you currently own. The
bond matures ...

Solution Summary

The solution describes the features of the bond.

$2.19