Explore BrainMass

Explore BrainMass

    Bond questions

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please see the attachment.

    7-3 The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that statement true or false? Explain. (Hint: Make up a "reasonable" example based on a 1-year and a 20-year bond to help answer the question.)

    7-5 If you buy a callable bond and interest rates decline, will the value of your bond rise by as much as it would have risen if the bond had not been callable? Explain.

    7-1 BOND VALUATION Callaghan Motors' bonds have 10 years remaining to maturity. Interest is paid annually, they have a $1,000 par value, the coupon interest rate is 8%, and the yield to maturity is 9%. What is the bond's current market price?

    7-9 YIELD TO MATURITY Heymann Company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%.
    a. What is the yield to maturity at a current market price of (1) $829 and (2) $1,104?
    b. Would you pay $829 for each bond if you thought that a "fair" market interest rate for such bonds was 12%-that is, if rd = 12%? Explain your answer.

    7-13 PRICE AND YIELD An 8% semiannual coupon bond matures in 5 years. The bond has a face value of $1,000 and a current yield of 8.21%. What are the bond's price and YTM? (Hint: Current yields is the annual interest payment divided by the current price.)

    © BrainMass Inc. brainmass.com June 4, 2020, 12:07 am ad1c9bdddf
    https://brainmass.com/economics/bonds/bond-questions-319898

    Attachments

    Solution Summary

    The solution explains some questions relating to bond calculations

    $2.19

    ADVERTISEMENT