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Exersise 11 what is the current bond price? Fivercise 2: Johnson Rcal Ectate Company is planning to fund a development project by isuang 10 yrur nro crupon bonds with a face value of 51.000. Assuming semianneal compounding. What will be the prise of flirke bonds if the appropriate diwcount rate is 14 percent? Excrcise 3: andual coupon payments and a face salue of $1,000 a. Avsume the yreld to maturity is ? percent b. Assumv the yield to maturity is 4 perecui. Exercise 4: A 22-year U.S. Treazury bond with a face value of 51.000 pays a coupon of 6 percent of face value The reported yicld to maturity is 5.6. mir. a. What is the present vatue of the bond? b. If the yicld to maturity changes to 15 . what will he the prevent salue? c. If the yicld to maturity changes to 8%. What will be the present salue? d. If the yicld to maturity changes to 1516. what will be the present salue? Exercise 5: a. The 7.6%. ten-year bond yields 5.565. Ii this yield to maturity remains unchanged. what will be its price one year hence? Assume annual coupon payments and a face salue of 51.000. b. What is the total return to an inveotor who held the hond over this year? a.7.2514b.6.478&5.129of7,67% increase shortly after the hand is rosimed answer ilhe tollowing a. What happens to the bond seaupon rate? b. What happens in the hend s prive? *. What happens to the bond's yivld to maturity ? 7. A bond' s coupon rate Equal irs annual coupon payment divided by the bonds' current market price a. Varies during the life of the bond b. Equals its annual coupon payment divided by the interest rate c. Equals its annual coupon payment divided by its par value d. Both 1 and 2 are correct 8. Indicate whether the following statements are true or false: a. Conger-maturity bonds necessarily have longer durations. b. The longer a bond's duration, the lower its volatility. (Volatility = modificel duration.) 6. Other things equal, the lower the bond coupon, the higher its volatility. d. If interest rates rise, bond durations rise also. price of the bond: a. changes by 5,2 pereent. h. changes by 2.6 percent. . chanoss by 7.8 percent. d. will not change. Larroive : Multiple choises 1. A four-ycar bond has an 7 persens coupon rate and a face value of 51.000. If the current price of the bond in 548.13, calculate the yicld to maturity of the bond rassiuming annual interest payments) 4. 12 persent b. 7 perent c. 9 peresnt d. 5 perevnt 2. A hond with durition of 8 years tire a yeld to muturity of 13.50 pereent. Thin bonds solatility (mindifict durafini) is 4. 7.08 pirsent, h. 4.76 percent c. 12.56 persent d. 13.50 persent. 3. If a bond s volatility is 6 pereent and the imterest rate goes down by 0.75 persent (peints). then the price of the bond: at. decreases by 6.0 persent b. decreaces by 4.50 percent. c. increases by 4 . 50 percent. d. increases by 0.75 pervent. 4. A threc-ysar bond has an 11 persent coupon rate and a 51.000 foce value. If the yicld to maturity on the bond is 14 persent. calculale the price of the bond atsuming that the bond makes semiannual coupon paymento. a. 5809.9.5 b. 5928.509 c. 51.076.54 d. 51.000.00

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