What is the bonds yield to maturity

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Question 1: ExxonMobil 20-year bonds pay 6 percent interest annually on a $1,000 par value. If the bonds sell at $945, what is the bonds' expected rate of return?

Question 2. Kyser Public Utilities issued a bond with a $1,000 par value that pays $30 in annual interest. It matures in 20 years. Your required rate of return is 4 percent.

a. Calculate the value of the bond.

b. How does the value change if your required rate of return (1) increases to 7 percent or (2) decreases to 2 percent?

c. Explain the implications of your answers in part (b) as they relate to interest rate risk, premium bonds, and discount bonds.

d. Assume that the bond matures in 10 years instead of 20 years. Recompute your answers in part (b).

e. Explain the implications of your answers in part (d) as they relate to interest rate risk, premium bonds, and discount bonds.

Question 3. (Bondholders' expected rate of return) Sakara Co. bonds are selling in the market for $1,045. These 15-year bonds pay 7 percent interest annually on a $1,000 par value. If they are purchased at the market price, what is the expected rate of return?

Question 4. Yield to maturity) An 8-year bond for Rusk Corporation has a market price of $700 and a par value of $1,000. If the bond has an annual interest rate of 6 percent, but pays interest semiannually, what is the bond's yield to maturity?

Reference no: EM133492892

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