QuestionsBond Valuation and Interest Rates Q 1 Microhard

Questions-Bond Valuation and Interest Rates

Q 1) • Microhard has issued a bond with the following characteristics: • • Par=$1, 000 Time to Maturity: 13 years Coupon Rate: 8% Semiannual payments • Calculate the price of this bond if the YTM is: • 8% • 10% • 6%

Q 2) • Watters Umbrella Corp. issued 15 -year bonds 2 years ago at a coupon rate of 7 percent. The bonds make semiannual payments. If these bonds currently sell for 90 percent of par value, what is the YTM?

Q 3) • Rhiannon Corporation has bonds on the market with 14. 5 years to maturity, a YTM of 7. 5 percent, and a current price of $1, 061. The bonds make semiannual payments. • What must be the coupon rate on these bonds?

Q 4) • The Faulk Corp. has a 4 percent coupon bond outstanding. The Gonas Company has a 10 percent bond outstanding. Both bonds have 13 years to maturity, make semiannual payments, and have a YTM of 7 percent. • If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?

Q 5) • The Faulk Corp. has a 5 percent coupon bond outstanding. The Gonas Company has a 11 percent bond outstanding. Both bonds have 14 years to maturity, make semiannual payments, and have a YTM of 8 percent. • If interest rates suddenly rise by 2 percent, what is the percentage change in the price of these bonds?

Q 6) • Hacker Software has 9. 8 percent coupon bonds on the market with 18 years to maturity. The bonds make semiannual payments and currently sell for 107. 7 percent of par. • What is the current yield on the bonds? • What is the YTM? • What is the effective annual yield?