Answer Happy

1. (Find YTM with annual coupons). Suppose a company has a bond
outstanding that sells for
95 percent of its $1,000 par value. The bond has a coupon rate of
5.4 percent paid annually and
matures in 16 years. What is the yield to maturity of this
bond?
2. (Find coupon rate). Suppose a bond pays coupon annually. It has
seven years to maturity, a par
value of $1,000, and currently selling for $962. At this price, the
bond yield 6.6 percent. What
must the coupon rate be on the bonds? (Hint: find the coupon
payment first and then the rate by
dividing the coupon by the par value).
3. (Find bond price with semiannual coupons). Suppose your friend
wants to invest in a bond
with 14 years of maturity and a coupon rate of 7.5 percent. The
bond makes semiannual payments
and have a par value of $1,000. Your friend asked you for your
suggestion. If the YTM on this
bond is 5.8 percent, what is the current bond price?
4. (Find YTM with semiannual coupons). West Corp. issued 10-year
bonds two years ago at a
coupon rate of 7.2 percent. The bonds make semiannual payments. If
these bonds currently sell for
102 percent of par value, what is the YTM?