Project #41894 - Chapter 7

1. Rank from highest credit risk to lowest risk the following bonds, with the same time to maturity, by their yield to maturity: (Rank: 1 = highest, 4 = lowest) 

 

  
  Treasury bond with yield of 4.90 percent   
  IBM bond with yield of 6.14 percent   
  Trump Casino bond with yield of 7.64 percent   
  Banc One bond with a yield of 8.91 percent   

 

 

2.  Determine the interest payment for the following three bonds (Assume a $1,000 par value.) (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to 2 decimal places):

 

  
  3.35 percent coupon corporate bond (paid semiannually)   
  4.10 percent coupon Treasury note   
  Corporate zero coupon bond maturing in ten years   

 

 

3. A 5.20 percent coupon bond with 15 years left to maturity is offered for sale at $935.22. What yield to maturity is the bond offering? (Assume interest payments are semiannual.) (Round your answer to 2 decimal places.)

  

  Yield to maturity  %  

 

 

 

4. A 6.70 percent coupon bond with ten years left to maturity is priced to offer a 8.4 percent yield to maturity. You believe that in one year, the yield to maturity will be 8 percent. What is the change in price the bond will experience in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 

Change in bond price$   

 

 

 

 

 

5. A 9.3 percent coupon bond with 15 years left to maturity is priced to offer a 7.15 percent yield to maturity. You believe that in one year, the yield to maturity will be 8.0 percent.

 

What would be the total return of the bond in dollars? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 

  Total return   

 

What would be the total return of the bond in percentage? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

 

  Total return  %  

 

 

 

 

6.  Consider the following three bond quotes: a Treasury bond quoted at 105:15, a corporate bond quoted at 96.60, and a municipal bond quoted at 101.00. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? (Do not round intermediate calculations and round your final answers to 2 decimal places.)

 

  
  Treasury note   
  Corporate bond   
  Municipal bond   

 

 

 

7. A 2.90 percent coupon municipal bond has 13 years left to maturity and has a price quote of 96.55. The bond can be called in four years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.)

 

Compute the bond’s current yield. (Round your answer to 2 decimal places.)

 

  Current yield  %  

 

Compute the yield to maturity. (Round your answer to 2 decimal places.)

 

  Yield to maturity  %  

 

Compute the taxable equivalent yield (for an investor in the 35 percent marginal tax bracket). (Round your answer to 2 decimal places.)

 

  Equivalent taxable yield  %  

 

Compute the yield to call. (Round your answer to 2 decimal places.)

 

  Yield to call  %  

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Due By (Pacific Time) 10/07/2014 12:00 am
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