Limits issuer actions that may endanger repayment of bonds

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1. Cut and paste the definitions in Table 1 to their corresponding definitions in Table 2.

Table 1.

Limits issuer actions that may endanger repayment of the bonds

Years until the issuer must repay the money borrowed

States that the issuer may repurchase the bonds prior to maturity at specific times and prices

Return on a bond purchased today and held for one year

Value stated on face of bond

Annuity providing a future amount

Table 2.

Maturity

Face value

Current yield

Sinking fund

Call provision

Restrictive covenant

Morgan Stanley has a 3-year, 4.9% bond with a yield to maturity of 4.03%.

2. What is the price of the bond?

3. Is the bond selling at a premium or a discount?

4. What is the current yield on this bond?

Capital One has a 7-year, 8.9% bond issue selling for $991.78.

5. What is the yield to maturity on this bond?

6. Is the bond selling at a premium or a discount?

7. What is the current yield on this bond?

Reference no: EM132376889

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