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Finance: 12 year, 5% coupon bond

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Today is January 1. Starting today, Sam is going to contribute $140 on the first of each month to his retirement account. His employer contributes an additional 50% of the amount contributed by Sam. If both Sam and his employer continue to do this and Sam can earn a monthly rate of ½ of 1 percent, how much will he have in his retirement account 35 years from now?

What is the future value of the following cash flows at the end of year 3 if the interest rate is 9%? The cash flows occur at the end of each year.
Year 1 Year 2 Year 3
$9,820 $0 $ 4510

A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000. What is the change in the price of this bond if the market yield rises to 6% from the current yield of 4.5%?

Party Time, Inc. has a 6% coupon bond that matures in 11 years. The bond pays interest semiannually. What is the market price of a $1,000 face value bond if the yield to maturity is 12.9%?

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Solution Summary

This solution answers four finance questions addressing, future values, earning rates and coupon bonds.

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A 10-year bond has a 10 percent annual coupon and a yield to maturity of 12 percent - BA II Financial Calculator

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42. Bond concepts
. A 10-year bond has a 10 percent annual coupon and a yield to maturity of 12 percent. The bond can be called in 5 years at a call price of $1,050 and the bond's face value is $1,000. Which of the following statements is most correct?

a. The bond's current yield is greater than 10 percent.
b. The bond's yield to call is less than 12 percent.
c. The bond is selling at a price below par.
d. Both answers a and c are correct.
e. None of the above answers is correct.

43. Bond value - semiannual payment
You intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months. If your nominal annual required rate of return is 10 percent with semiannual compounding, how much should you be willing to pay for this bond?

44. Bond value - semiannual payment
. Due to a number of lawsuits related to toxic wastes, a major chemical manufacturer has recently experienced a market reevaluation. The firm has a bond issue outstanding with 15 years to maturity and a coupon rate of 8 percent, with interest paid semiannually. The required nominal rate on this debt has now risen to 16 percent. What is the current value of this bond?

45. YTM and YTC
. A corporate bond matures in 14 years. The bond has an 8 percent semiannual coupon and a par value of $1,000. The bond is callable in five years at a call price of $1,050. The price of the bond today is $1,075. What are the bond's yield to maturity and yield to call?

46. Yield to call
. A 12-year bond with a 10 percent semiannual coupon and a $1,000 par value has a nominal yield to maturity of 9 percent. The bond can be called in five years at a call price of $1,050. What is the bond's nominal yield to call?

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