Sample financial questions: bonds, yields, coupon rates, maturity and more...
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3. A bond has a coupon rate of 8.5% and 18 years until maturity. If the yield to maturity is 6.7%, what is the price of the bond?
5. A bond sells for $864.50 and has a coupon rate of 6%. If the bond has 16 years until maturity, what is the yield to maturity of the bond?
8. Sealord Fisheries issues zero coupon bonds on the market at a price of $150 per bond. Each bond has a face value of $1,000 payable at maturity in 20 years. What is the yield to maturity for these bonds?
10. If instead the Sealord Fisheries zero coupon bonds referred to above in question # 8, are callable in 10 years at a call price of $475, what is their yield to call?
11. Dunbar Corp. has bonds on the market with 11.5 years to maturity, a Yield to Maturity of 7.5 percent, and a current price of $1,084. What must the coupon rate be on Dunbar's bonds?
14. A zero coupon bond with a 9%Yield To Maturity has 15 years to maturity. Two years later, the price of the bond remains the same. What going on here?
16. Bond X is a premium bond with an 8% coupon, a Yield to Maturity of 6 percent, and 15 years to maturity. Bond Y is a discount bond with 8% coupon, a Yield to Maturity of 10 %, and also 15 years to maturity. If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 5 years? In 10 years? In 14 years? In 15 Years? What's going on here?
18. Bond J is a 4% coupon bond. Bonk K is a 10% coupon bond. Both bonds have 10 years to maturity and have a Yield To Maturity of 7%. If interest rates suddenly rise by 2%, what is the percentage price change of these bonds? What if rates suddenly fall by 2% instead? What does this problem tell you about the interest rate risk of lower-coupon bonds?
25. A bond with a coupon rate of 7% sells at a yield to maturity of 8%. If the bond matures in 13 years, what is the Macaulay duration of the bond? What is the modified duration?
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3. A bond has a coupon rate of 8.5% and 18 years until maturity. If the yield to maturity is 6.7%, what is the price of the bond?
Annual payment = 1000*8.5% = 85
Number of years = 18
YTM (rate) = 6.7%
FV = 1000
Then by a financial calculator, we can compute PV = $1185.05
5. A bond sells for $864.50 and has a coupon rate of 6%. If the bond has 16 years until maturity, what is the yield to maturity of the bond?
Annual payment = 1000*6% = 60
Number of years = 16
FV = 1000
PV = - 864.50
Then by a financial calculator, we can compute YTM (rate) = 7.48%
8. Sealord Fisheries issues zero coupon bonds on the market at a price of $150 per bond. Each bond has a face value of $1,000 payable at maturity in 20 years. What is the yield to maturity for these bonds?
Annual payment = 0
Number of years = 20
FV = 1000
PV = -150
Then by a financial calculator, we can compute YTM (rate) = 9.95%
10. If instead the Sealord Fisheries zero coupon bonds referred to above in question # 8, are callable in 10 years at a call price of $475, what is their yield to call?
Annual payment = ...
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