9. A bond matures in 12 years and pays a 6 percent annualcoupon. The bond has a face value of $1,000 and currently sells for$890. What is the bond’s current yield and yield to maturity?
10. The face value for Karen’s Limited bonds is $100,000 and hasa 2 percent annual coupon. The 2 percent annual coupon bondsmatures in 2022, and it is now 2012. Interest on these bonds ispaid annually on December 31 of each year, and new annual couponbonds with similar risk and maturity are currently yielding 12percent. How much should Karen sell her bonds today?
11. Your client has been offered a 5-year, $1,000 par value bondwith a 10 percent coupon. Interest on this bond is paid quarterly.If your client is to earn a nominal rate of return of 12 percent,compounded quarterly, how much should she pay for the bond?
12. What is the semi-annual coupon bond’s nominal yield tomaturity (YTM), if the years to maturity is 15 years, and sells for119% with coupons rate of 10%? Assume the par value of the bond is$1,000.
13. The current price of a 10-year, $1,000 par value bond is$1,158.91. Interest on this bond is paid every six months, and thenominal annual yield is 14 percent. Given these facts, what is theannual coupon rate on this bond?
14. Bond Relationships. Select one or more of the followingphrases to complete the following sentences. increase , decrease,par, discount, premium, less than, more than, greater , less a. Ifthe current interest rate exceeds the bond’s coupon rate, the bondwill sell at a ___________. b. The value of a bond to increase ifthere is a/an ________ in interest rates. c. A bond’s coupon rateis more than the interest rate, therefore the bond is selling at a_____________. d. As interest rate increases the value of a bondwill ______________. e. If the bondholder’s required rate of returnequals the coupon interest rate, the bond will sell at _________.f. A premium bond sells for ____________ as maturity approaches. g.The discount bond sells for ____________ as maturity approaches. h.A bondholder with a short-term bond is exposed to ___________interest rate risk than when owing a long-term bond.
15. Which of the following statements is most correct withregards to a 10 year bond with a 9% annual coupon rate and a YTM of8%? a) The bond is selling at a discount. b) The bond’s currentyield is greater than 9 percent. c) If the yield to maturityremains constant, the bond’s price one year from now will be lowerthan its current price.
