Question 1

A $100 000, 6.0% bond with semi-annual coupons redeemable at par is bought 17.5 years before maturity at 74.25. What was the approximate yield rate?

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Question 2

A 50 000 bond that pays 5% semi-annually is redeemable at par on July 15, 2025.It is quoted at 97.5 on December 2, 2013. Determine the yield rate.

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Question 3

A 4.5% annuity bond of $500 000 with interest payable quarterly is to be redeemable at par in seven years.
a) What is the purchase price to yield 6% compounded quarterly?
b) What is the book value after 6 years?
c) What is the gain or loss if the bond is sold six years after the date of purchase at 99.625?

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Question 4

A $25 000, 8% bond with semi-annual coupons, redeemable at par in 12 years, is purchased to yield 6% compounded semi-annually. Determine the gain or loss if the bond is sold two years later at

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Question 5

A $100 000, 8% bond with semi-annual coupons redeemable at par on April 25, 2018, was purchased on June 25, 2009, at 94.125. What was the approximate yield rate?

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Question 6

A $10 000.00, 5% bond with semi-annual coupons redeemable at 105 in 23 years is purchased at 102.5. What is the approximate yield rate?

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Question 7

To redeem a $100 000.00 promissory note due in 12 years, Flinstone Inc. has set up a sinking fund earning 7.25% compounded semi-annually. Equal deposits are made at the beginning of every six months.
a) What is the size of the semi-annual deposits?
b) How much of the maturity value of the fund is deposits?
c) How much is interest?

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The answer of To redeem a $100 000.00 promissory note...

Question 8

A sinking fund amounting to $115 000.00 is to be created by making payments at the beginning of every six months for 6 years. Interest earned by the fund is 6.5% compounded semi-annually. Determine the size of the semi-annual payments and prepare a sinking fund schedule showing totals.

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Question 9

A $50 000, 6% bond with semi-annual coupons redeemable at par on April 25, 2018, was purchased on June 25, 2009, at 94.378. What was the approximate yield rate?

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Question 10

A $40 000.00, 5% bond with semi-annual coupons redeemable at par in 14 years is purchased to yield 7% compounded semi-annually. What is the gain or loss if the bond is sold three years before maturity at 99.75?

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Question 11

To redeem a $10 000.00 promissory note due in 12 years, SEJE has set up a sinking fund earning 8% compounded semi-annually. Equal deposits are made at the beginning of every six months. What is the size of the semi-annual deposits?

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Question 12

A manufacturing company is planning a $600 000 expansion 6 years from now. By that time the company intends to accumulate 75% of the cost of the expansion by making payments into a sinking fund at the beginning of each of the next six years. Interest paid by the fund is 7% compounded annually.
a) Calculate the size of annual payment into the fund.
b) Calculate the total amount deposited into the fund.
c) Calculate the amount of interest.

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Question 13

A $40 000 bond with semi-annual coupon payments at 5.5% compounded semi-annually is redeemable at par in 12 years. Calculate the yield rate if the bond is purchased at 102.5.

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Question 14

Find the gain or loss on the sale without constructing a bond schedule for three $100 000, 5.5% bonds with quarterly coupons redeemable at par on September 1, 2017, bought on May 1, 2011, to yield 6% compounded quarterly. The bonds were sold on January 21, 2014, at 93.5.

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Question 15

A $25 000, 7% bond with semi-annual coupons redeemable at par in twenty-two years is purchased to yield 6% compounded semi-annually. Determine the gain or loss if the bond is sold seven years after the date of purchase at 98.25.

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Question 16

Phoenix Corporation is depositing equal sums of money at the beginning of every three months into a sinking fund to redeem a $165 000.00 promissory note due 11 years from now. Interest earned by the fund is 4.6% compounded quarterly.
a) Determine the size of the quarterly payments into the sinking fund.
b) Compute the balance in the fund after 6 years.
c) Compute the increase in the fund during the 25th payment interval.
d) Construct a partial sinking fund schedule showing details of the first three deposits, the last three deposits, and totals.

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Question 17

A $50 000.00, 6% bond with semi-annual coupons redeemable at par in 14 years is purchased to yield 8% compounded semi-annually. What is the gain or loss if the bond is sold four years before maturity at 99.25?

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Question 18

The Town of Snow Lake issued debentures worth $420 000.00 maturing in 15 years to finance construction of recreational facilities. To redeem the debentures, the town council decided to make equal deposits into a sinking fund at the beginning of every three months. Interest earned by the sinking fund is 6.66% compounded quarterly.
a) What is the size of the quarterly payment into the sinking fund?
b) What is the balance in the fund after six years?
c) How much interest is earned by the fund in the 25th payment interval?
d) By how much will the fund increase in the 43rd payment interval?
e) Prepare a partial sinking fund schedule showing details of the first three payments, the last three payments, and totals.

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Question 19

A $250 000, 6.5% bond with semi-annual coupons redeemable at par is bought 17.5 years before maturity at 78.25. What was the approximate yield rate?

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Question 20

Cranberry Portage Credit Union borrowed $425 000.00 at 6% compounded semi-annually from League Central to build a sports complex. The loan agreement requires payment of interest at the end of every six months. In addition, the credit union is to make equal payments into a sinking fund so that the principal can be retired in total after 11 years. Interest earned by the fund is 4.14% compounded semi-annually.
a) What is the semi-annual interest payment on the debt?
b) What is the size of the semi-annual deposits into the sinking fund?
c) What is the total annual cost of the debt?
d) What is the interest earned by the fund in the 18th payment interval?
e) What is the book value of the debt after 6 years?
f) Prepare a partial sinking fund schedule showing details, including the book value of the debt, for the first three payments, the last three payments, and totals.

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Quiz 15: Bond Valuation and Sinking Funds