Reference no: EM13770159
1. Suppose a 12% coupon bond sells at par today; and three years from today, the required rate on the same bond is 8%. What is the coupon rate on the bond today and what will it be 3 years from today. What is the par value today and what will it be three years from today?
2. XYZ Corp. needs to raise funds to finance a plant expansion. Mgt. decided to issue 25-year zero coupon bonds to raise the money. The required rate of return is 5%. What will these bonds sell at issuance?
3. ABC Corp. has 6% coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments. If the yield to maturity is 7%, what is the current bond price?
4. What happens to the price of a three-year bond with an 8% coupon when interest rates change from 8% to 6%? How much will it change from par?
5. GHI Corp. has bonds on the market making annual payments, with 15 years to maturity and selling for $1,103.78. At this price the bond's current yield is 5.44%. What is the coupon rate for this bond?
6. Write down the current prime rate, 15-year mortgage rate, the 3 month T-Bill rate and the 5-year T-Bond rate (for the USA). Are you surprised?
7. In a recent issue of The Wall Street Journal the following Treasury bond quote was published:
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Rate
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Maturity Mo/Yr
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Bid
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Asked
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Change
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Ask yield
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3 1/8
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Apr 09 n
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99:25
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99:26
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-2
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3.24
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What do these numbers mean?
8. Two years ago bonds were issued with 10 years until maturity, selling at par, and a 7% coupon. If interest rates for that grade of bond are currently 8.25%, what will be the market price of these bonds?
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