Assignment

Question 1
Facade Securities has an issue of $1,000 par value bonds with 18 years remaining to maturity. The bonds pay 7.7% interest on a semiannual basis. The current market price of the bonds is $1,175. What is the yield-to- maturity of the bonds?

6.09%

6.87%

7.24%

8.38%

Question 2
Nunavet Ocean Cruises sold an issue of 12-year $1,000 par bonds to build new ships. The bonds pay 4.85% interest, semiannually. Today's required rate of return is 9.7%. How much should these bonds sell for today? Round off to the nearest $1.

$771.86
$732.93
$660.45
$598.33

Question 3
PBJ Corporation issued bonds on January 1, 2006. The bonds had a coupon rate of 5.5%, with interest paid semiannually. The face value of the bonds is $1,000 and the bonds mature on January 1, 2021. What is the yield to maturity for an PBJ Corporation bond on January 1, 2012 if the market price of the bond on that date is $950?

5.50%
6.23%
8.43%
10.50%

Question 4
Jerome Corporation's bonds have 15 years to maturity, an 8.75% coupon paid semiannually, and a $1,000 par value. The bond has a 6.50% nominal yield to maturity, but it can be called in 6 years at $1,050. What is the bond's nominal yield to call?

5.01%
5.27%
5.54%
5.81%
6.10%

Question 6
As interest rates, and consequently investors' required rates of return, change over time the _ of outstanding bonds will change as a result.

maturity date
coupon interest payment
par value
price

Question 6
Which of the following statements is true?

Short-term bonds have greater interest rate risk than do long-term bonds.
Long-term bonds have greater interest rate risk than do short-term bonds.
All bonds have equal interest rate risk.
Interest rate risk is highest during periods of high interest rates.

Question 7
What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7.02%.

$1,198.45
$1,200.78
$1,284.38
$1,349.45

Question 8
Cabell Corp. bonds pay an annual coupon rate of 10%. If investors' required rate of return is now 12% on these bonds, they will be priced at

par value.
a premium to par value.
a discount to par value.
Cannot be determined without knowing the number of years to maturity.

The economy is not in a recession.
Long-term bonds are a better buy than short-term bonds.
Maturity risk premiums could help to explain the yield curve's upward slope.
Long-term interest rates are more volatile than short-term rates.
Inflation is expected to decline in the future.

Question 10
If a corporation were to choose between issuing a debenture, a mortgage bond, or a subordinated debenture, which would have the highest yield to maturity, everything else equal?

the debenture
the mortgage bond
the subordinated debenture
all of the above.