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FIN5100: Exercise on BOND

1. Consider the three bonds described here.

a. If all three bonds a required of 8.2 %, what will be each bond’s price?

b. Which bonds are selling at a discount? At a premium? A par?

c. If required returns on these bonds all rise to 10.2%, what are their new prices?

d. If Bond X were selling for RM1,070, what would be its yield to maturity and current yield?

2. A corporate bond  with a RM1,000 face value pays a RM45 coupon every six months.  The bond will mature in ten years, and has a nominal yield to maturity of 9.5 percent.  What is the price of the bond?

3. Morin Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of $70.  The market requires an interest rate of 7.75% on these bonds.  What is the bond's price?

4. PokYat Inc. recently issued noncallable bonds that mature in 15 years.  They have a par value of $1,000 and an annual coupon of 5.75%.  If the current market interest rate is 9.75%, at what price should the bonds sell?

5. Primula Inc.'s bonds currently sell for $1,190 and have a par value of $1,000.  They pay a $67.5 annual coupon and have a 15-year maturity, but they can be called in 8 years at $1,150.  What is their yield to maturity (YTM)?

6. Sadik Inc.'s bonds currently sell for $1,270 and have a par value of $1,000.  They pay a $115 annual coupon and have a 15-year maturity, but they can be called in 7 years at $1,110.  What is their yield to call (YTC)?

7. A 25-year, $1,000 par value bond has an 8.5% annual payment coupon.  The bond currently sells for $950.  If the yield to maturity remains at its current rate, what will the price be 6 years from now?

8. Miss Sephia is considering buy new bond, Bond X with A-grade. It has an 8.2% semiannual coupon and a face value of RM1,000. Bond X is scheduled to mature in 10 years and has a price of RM1,150. It is also callable in 7 years at a call price of RM1,050.

 Calculate the bond’s nominal yield to maturity and yield to call?

9. It is now January 1, 2014, and you are considering the purchase of an outstanding bond that was issued on January 1, 2012. It has a 9% semi-annual coupon and a had a 30-year original maturity. (It matures on December 31, 2041.) There is 5 year of call protection (until December 21, 2016), after which time it can be called at 109- that is , 109% of par. Interest rates have declined since it was issued: this bond is now selling at RM1,165.75.)

(i) What is the yield to maturity? 

(ii) What is the yield to call?