Question 1

Harrison Hotels has 8-year, $1,000 face value bonds outstanding that pay an 11 percent semiannual coupon. If your nominal annual required rate of return is 9 percent with semiannual compounding, how much should you be willing to pay for one of these bonds?

Accepted Answer

The answer of Harrison Hotels has 8-year, $1,000 face value...

Question 2

A $1,000 par value bond pays interest of $30 each quarter and will mature in 12 years. If your nominal annual required rate of return is 16 percent with quarterly compounding, how much should you be willing to pay for this bond?

Accepted Answer

The answer of A $1,000 par value bond pays interest...

Question 3

Atlanta Power's non-callable bonds have a face value of $1,000, and pay a 9 percent semiannual coupon. In other words, there is a coupon payment of $45 every six months. Each bond has 11 years until maturity, and sells at a price of $1,070. What is the bond's nominal yield to maturity?

Accepted Answer

The answer of Atlanta Power's non-callable bonds have a face...

Question 4

Abilene Electric has 13-year, $1,000 face value bonds outstanding that pay an 8 percent semiannual coupon. If your nominal annual required rate of return is 11 percent with semiannual compounding, what is the current yield on the bonds?

Accepted Answer

The answer of Abilene Electric has 13-year, $1,000 face value...

Question 5

Piven Construction's bonds mature in 13 years. The bonds have a 7 percent semiannual coupon and a par value of $1,000. The bonds are callable in five years at a call price of $1,035. The price of the bonds today is $1,080. Assuming that interest rates remain at the same level they are today, what yield can investors expect to earn on these bonds?

Accepted Answer

The answer of Piven Construction's bonds mature in 13 years....

Question 6

Freeman Cobblers recently issued 10-year bonds at a price of $1,000. These bonds pay $50 in interest each six months. Their price has remained stable since they were issued, that is, they still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years, a par value of $1,000, and pay $45 in interest every six months. If both bonds have the same yield, how many new bonds must Freeman issue to raise $3,000,000?

Accepted Answer

The answer of Freeman Cobblers recently issued 10-year bonds at...

Question 7

Assume that you are considering the purchase of a $1,000 par value bond that pays interest of $60 each six months and has 10 years before maturity. If you purchase this bond, you expect to hold it for 5 years and then to sell it in the market. You (and other investors) currently require a nominal annual rate of 14 percent, but you expect the market to require a nominal rate of only 10 percent when you sell the bond due to a general decline in interest rates. How much should you be willing to pay for this bond today?

Accepted Answer

The answer of Assume that you are considering the purchase...

Question 8

A bond with 12 years to maturity has a 7 percent semiannual coupon and a face value of $1,000. (That is, the bond pays a $35 coupon every six months.) The bond currently sells for $1,010. What should be the price of a bond that pays a 7 percent annual coupon and has a face value of $1,000 with the same risk and maturity as the semiannual bond?

Accepted Answer

The answer of A bond with 12 years to maturity...

Question 9

Stern Design has bonds outstanding that have an 8 percent annual coupon and a face value of $1,000. The bonds will mature in 15 years, although they can be called before maturity at a call price of $1,050. The bonds have a yield to call of 6.8 percent and a yield to maturity of 7.1 percent. If interest rates remain at their current level, how long until these bonds may first be called?

Accepted Answer

The answer of Stern Design has bonds outstanding that have...

Quiz 8: Debt Instruments and Markets

Harrison Hotels has 8-year, $1,000 face value bonds outstanding that pay an 11 percent semiannual coupon. If your nominal annual required rate of return is 9 percent with semiannual compounding, how much should you be willing to pay for one of these bonds?

A $1,000 par value bond pays interest of $30 each quarter and will mature in 12 years. If your nominal annual required rate of return is 16 percent with quarterly compounding, how much should you be willing to pay for this bond?

Atlanta Power's non-callable bonds have a face value of $1,000, and pay a 9 percent semiannual coupon. In other words, there is a coupon payment of $45 every six months. Each bond has 11 years until maturity, and sells at a price of $1,070. What is the bond's nominal yield to maturity?

Abilene Electric has 13-year, $1,000 face value bonds outstanding that pay an 8 percent semiannual coupon. If your nominal annual required rate of return is 11 percent with semiannual compounding, what is the current yield on the bonds?