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Question $1$: Consider a $20-$year bond with a face value of $$$$1000$ that has a coupon rate of $5\mathrm{.}9\%,$ with semiannual payments.

a$.$ What is the coupon payment for this$$ bond?

b$.$ Draw the cash flows for the bond on a timeline.

Question $2$

Part $1$

Your company wants to raise $$$$7\mathrm{.}5$ million by issuing $25-$year $$zero$-$coupon bonds. If the yield to maturity on the bonds will be $6\%($annual compounded APR$),$ what total face value amount of bonds must you$$ issue?

Part $1$

The total face value amount of bonds that you must issue is $$$

Which of the following best illustrates why a bond is a type of$$ loan?

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Part $1$

A$.$

Funds raised are used to finance longminusterm projects.

B$.$

When a company issues a$$ bond, the buyer of that bond becomes an owner of the issuing company.

C$.$

When an investor buys a bond from an$$ issuer, the investor is giving money to the$$ issuer, with the assurance that it will be repaid at a date in the future.

D$.$

The issuers of bonds make regular payments to bondholders.

Which of the following is true about the face value of a$$ bond?

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Part $1$

A$.$

It is the notional amount we use to compute coupon payments.

B$.$

It is the amount that is repaid at maturity.

C$.$

It is usually denominated in standard$$ increments, such as$$ $$1,000.$

D$.$

All of the above are true.

The current$$ zero$-$coupon yield curve for$$ risk$-$free bonds is as$$ follows: LOADING.... What is the price per $$$$100$ face value of a$$ two$-$year, zero$-$coupon,$$ risk$-$free bond?

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Part $1$

The price per $$$$100$ face value of the$$ two$-$year, zero$-$coupon,$$ risk$-$free bond is $$$

$$

enter your response here

question $6$: The yield to maturity of a $$$$1$ comma $000$ bond with a $7\mathrm{.}4\%$ coupon$$ rate, semiannual$$ coupons, and two years to maturity is $8\mathrm{.}5\%$APR$,$ compounded semiannually. What is its$$ price?

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Part $1$

The price of the bond is $$$

$$

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question $7$: Suppose a $5-$year, $$$$1$ comma $000$ bond with annual coupons has a price of $$$$899\mathrm{.}42$ and a yield to maturity of $5\mathrm{.}5\%.$ What is the$$ bond's coupon$$ rate?

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Part $1$

The$$ bond's coupon rate is

$$

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question $8$: The prices of several bonds with face values of $$$$1$ comma $000$ are summarized in the following$$ table: LOADING.... For each$$ bond, state whether it trades at a$$ discount, at$$ par, or at a premium.

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Part $1$

Bond A is selling at

question $9$: You have purchased a $7\%$ coupon bond for $$$$1$ comma $070.$ What will happen to the$$ bond's price if market interest rates$$ rise?

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Part $1$

If market interest rates$$ rise, the$$ bond's price will$\_\_\_$

Question $10$:

Consider the following$$ bonds: LOADING.... Which of the bonds A to D is most sensitive to a $1\%$ drop in interest rates from $6\mathrm{.}9\%$ to $5\mathrm{.}9\%?$ Which bond is least$$ sensitive$?$

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Part $1$

Bond

A

B

C

D

is the most sensitive$.$

question $11$: Andrew Industries is contemplating issuing a $30-$year bond with a coupon rate of $7\mathrm{.}09\%($annual coupon$$ payments$)$ and a face value of $$$$1$ comma $000.$ Andrew Industries believes it can get a rating of A from Standard$$ & Poor's.$$ However, due to recent financial difficulties at the$$ company, Standard$$ & Poor's is warning that it may downgrade Andrew Industries$\text{'}$ bonds to BBB$.$ Yields on$$ A$-$rated, long$-$term bonds are currently $6\mathrm{.}49\%,$ and yields on$$ BBB$-$rated bonds are $6\mathrm{.}74\%.$

a$.$ What is the price of the bond if Andrew Industries maintains the A rating for the bond$$ issue?

b$.$ What will be the price of the bond if it is$$ downgraded?

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Part $1$

a$.$ What is the price of the bond if Andrew Industries maintains the A rating for the bond$$ issue?

If Andrew Industries maintains the A rating for the bond$$ issue, the price of the bond is $$$

question $12$:

HMK Enterprises would like to raise $$$$10\mathrm{.}0$ million to invest in capital expenditures. The company plans to issue $5-$year bonds with a face value of $$$$1$ comma $000$ and a coupon rate of $6\mathrm{.}52\%($annual payments$).$ The following table summarizes the yield to maturity for $5-$year $($annual$-$payment$)$ coupon corporate bonds of various$$ ratings: LOADING....

a$.$ Assuming the bonds will be rated$$ AA$,$ what will be the price of the$$ bonds?

b$.$ How much of the total principal amount of these bonds must HMK issue to raise $$$$10\mathrm{.}0$ million$$ today, assuming the bonds are AA$$ rated? $($Because HMK cannot issue a fraction of a$$ bond, assume that all fractions are rounded to the nearest whole$$ number.$)$

c$.$ What must be the rating of the bonds for them to sell at$$ par?

d$.$ Suppose that when the bonds are$$ issued, the price of each bond is $$$$958\mathrm{.}78.$ What is the likely rating of the$$ bonds? Are they junk$$ bonds?

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Part $1$

a$.$ Assuming the bonds will be rated$$ AA$,$ what will be the price of the$$ bonds?

The price of the bonds will be $$$

Question $12$:

Suppose a$$ seven$-$year, $$$$1$ comma $000$ bond with a coupon rate of $8\mathrm{.}4\%$ and semiannual coupons is trading wi

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