Reference no: EM132235121

Answering the following questions using cash flow method with financial calculator.

1. What is the value of a 5-year, $1,000 par value bond with a 9 percent annual coupon if its required annual rate of return is 10 percent? Does the bond sell at par?
2. What would happen to the value of the above 5-year bond over time if the required annual rate of return remained at 10 percent?
3. What is the yield to maturity (YTM) on a 10-year, 9 percent annual coupon, $1,000 par value bond that sells for $1,050?
4. Suppose a 10-year, 10 percent, semiannual coupon bond with a par value of $1,000 is currently selling for $1,135.90, producing a yield to maturity (YTM) of 8 percent. However, the bond can be called after 5 years for a price of $1,025.
5. What is the bond's yield to call (YTC)?
6. If you bought this bond, do you think you would be more likely to earn the YTM or the YTC? Why?