1. Assuming the market rate is 6.5 percent, what is the value of a bond that pays an annual coupon payment, a coupon rate of 8 percent, a par value of $1,000, and a maturity of 10 years.
Is the bond in question 6 selling for a discount, premium, or par?
2. Find the yield to maturity (YTM) for a bond with the following characteristics: Maturity = 15 years, Coupon Rate = 10%, Coupon Payments made Annually, Par = $1,000.
Bond Selling Price = $1,125
Bond Selling Price = $1,000
Bond Selling Price = $975
3. Assume that a bond has a coupon rate of 10 percent, makes annual coupon payments, and has a par value of $1,000. Calculate the bond’s value under the following conditions.
The bond matures in 5 years and the YTM is 5%:
The bond matures in 5 years and the YTM is 10%:
The bond matures in 5 years and the YTM is 15%:
The bond matures in 15 years and the YTM is 5%:
The bond matures in 15 years and the YTM is 10%:
The bond matures in 15 years and the YTM is 15%:
4. Looking at the prices that you calculated in problem 8, what effects do time and YTM have on a bond’s price?
Calculate the single and annual coupon payments assuming the following:
Semiannual bond, Coupon rate of 8 percent, Par value of $1,000:
Annual bond, Coupon rate of 4.5 percent, Par value of $100:
Monthly bond, Coupon rate 12 percent, Par value $850: