1. Wald Inc.'s bonds currently sell for $1,120 and have a par value of $1,000. They pay an $85 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,050. What is their YTM?

a. 5.95%  

b. 6.49%   

c. 6.71%  

d. 7.08%  

e. 7.34%  

2. Lei Corporation's bonds have a 30-year maturity, a 10% semiannual coupon ($50 coupon payments are made every six months), a face value of $1,000, and cannot be called. The going nominal annual interest rate (rd) for similar semiannual payment bonds of equivalent risk is 7%. What is the bond's price?

a. $957.49   

b. $1,000.00  

c. $1,146.33  

d. $1,374.17  

e. $1,454.06  

3. Wald Inc.'s bonds currently sell for $1,120 and have a par value of $1,000. They pay an $85 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,050. What return would an investor most likely earn, if interest rates remain at current levels for the foreseeable future?

a. 5.95%  

b. 6.49%  

c. 6.71%  

d. 7.08%  

e. 7.34%  

4. Assume Lei's bonds paid interest annually rather than semiannually. You could find the value of these bonds, in a market where the going nominal annual rate on semiannual payment bonds is 7%, by finding the effective annual rate, which is 7.1225%, and then discounting the annual bond's cash flows by this effective rate. The annual payment bonds would have a value of $1,352.72 versus $1,374.17. True or false?

a. True 

b. False

5. Wald Inc.'s bonds currently sell for $1,120 and have a par value of $1,000. They pay an $85 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,050. What is their YTC?

a. 5.95%  

b. 6.49%  

c. 6.71%  

d. 7.08%  

e. 7.34%