Reference no: EM132485373

Question 1: A firm's bonds have a maturity of 12 years with a $1,000 face value, have an 8% semiannual coupon, are callable in 6 years at $1,066.65, and currently sell at a price of $1,124.20. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places.

Question 2: What return should investors expect to earn on these bonds?

Point I. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC.

Point II. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM.

Point III. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM.

Point IV. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC.

Question 3: You are considering a 15-year, $1,000 par value bond. Its coupon rate is 9%, and interest is paid semiannually. If you require an effective annual interest rate (not a nominal rate) of 6.09%, how much should you be willing to pay for the bond? Do not round intermediate calculations. Round your answer to the nearest cent.

Question 4: A 6% semiannual coupon bond matures in 4 years. The bond has a face value of $1,000 and a current yield of 6.7001%. What are the bond's price and YTM? (Hint: Refer to Footnote 6 for the definition of the current yield and to Table 7.1) Do not round intermediate calculations. Round your answer for the bond's price to the nearest cent and for YTM to two decimal places.