Reference no: EM133495840

CORPORATE FINANCE

1. Gabriele Enterprises has bonds on the market making annual payments, with 10 years to maturity, a par value of $1,000, and selling for $870. At this price, the bonds yield 8.7 percent. What must the coupon rate be on the bonds?

2. You purchase a bond with a coupon rate of 8.7 percent and a clean price of $1,110. If the next semiannual coupon payment is due in two months, what is the invoice price? Assume a par value of $1,000.

3. You purchase a bond with a coupon rate of 8.7 percent and a clean price of $1,110. If the next semiannual coupon payment is due in two months, what is the invoice price? Assume a par value of $1,000.

a. What is the current yield on the bonds?

b. The YTM?

c. The effective annual yield?

4. McConnell Corporation has bonds on the market with 15 years to maturity, a YTM of 6.6 percent, a par value of $1,000, and a current price of $1,236.50. The bonds make semiannual payments. What must the coupon rate be on these bonds?

5. Chamberlain Company wants to issue new 12-year bonds for some much-needed expansion projects. The company currently has 11.0 percent coupon bonds on the market that sell for $1,381.26, make semiannual payments, and mature in 12 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? Assume a par value of $1,000.

6. You purchase a bond with an invoice price of $1,160. The bond has a coupon rate of 7.6 percent, and there are 3 months to the next semiannual coupon date. What is the clean price of the bond? Assume a par value of $1,000.

7. Weismann Company issued 6-year bonds a year ago at a coupon rate of 8 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 7 percent, what is the current bond price?

8. Both Bond Sam and Bond Dave have 9 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 3 years to maturity, whereas Bond Dave has 17 years to maturity.

If interest rates suddenly rise by 3 percent, what is the percentage change in the price of Bond Sam?