6.3.2

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2% and that the coupon payments are to be made semiannually.Assuming the appropriate YTM on the Sisyphean bond is 7.3%, then the price that this bond trades for will be closest to ________. A) $1063 B) $850 C) $1276

A) FV = $1000I = 3.65 (7.3/2)PMT = $41N = 20 (10 × 2) Compute PV = 1063.10

The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): The yield to maturity for the three-year zero-coupon bond is closest to ________. A) 5.40% B) 2.70% C) 10.80% D) 0.15%

A) Yield = (100/price)(1/n) - 1 =(100/85.40)(1/3)-1=0.054 or5.40%

12) Shown above is information from FINRA regarding one of Bank of Americaʹs bonds. How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid semiannually? A) $1.49 B) $2.15 C) $2.32 D) $4.30

B) 100 × 4.300% = $4.30; $4.30 / 2 = $2.15

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 5 years. The bond certificate indicates that the stated coupon rate for this bond is 8.1% and that the coupon payments are to be made semiannually.Assuming the appropriate YTM on the Sisyphean bond is 10.6%, then this bond will trade at ________. A) a premium B) a discount C) par D) none of the above

B) As the coupon rate of 8.1% is less than the YTM of 10.6% on the bonds, so they will trade at a discount.

The Sisyphean Company has a bond outstanding with a face value of $5000 that matures in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 8.9% and that the coupon payments are to be made semiannually. How much will each semiannual coupon payment be? A) $445.0 B) $222.5 C) $667.5 D) $890.0

B) Coupon payment = (coupon rate × face value)/number of coupons per year = (0.089 × 5000) / 2 = $222.5

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 10 years. The bond certificate indicates that the stated coupon rate for this bond is 8.0% and that the coupon payments are to be made semiannually.Assuming the appropriate YTM on the Sisyphean bond is 11.1%, then the price that this bond trades for will be closest to ________. A) $652 B) $816 C) $979 D) $1142

B) FV = 1000I = 5.55 (11.1/2)PMT = $40 ($80/2)N = 20 (10 × 2) Compute PV = 815.54

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 5 years. The bond certificate indicates that the stated coupon rate for this bond is 10.0% and that the coupon payments are to be made semiannually.Assuming the appropriate YTM on the Sisyphean bond is 7.5%, then this bond will trade at ________. A) par B) a discount C) a premium D) none of the above

C) As the coupon rate of 10.0% is more than the YTM of 7.5% on the bonds, so the bonds will trade at a premium

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in five years. The bond certificate indicates that the stated coupon rate for this bond is 8.5% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1081.73 , then the YTM for this bond is closest to ________. A) 5.2% B) 7.87% C) 6.56% D) 9.18%

C) FV = $1000PMT = $42.50 ($85 / 2)N = 10 (5 × 2)PV = -$1081.73Compute I = 3.2783 × 2 = 6.5565 %.

Shown above is information from FINRA regarding one of Caterpillar Financial Servicesʹ bonds. How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid annually? A) $1.38 B) $3.95 C) $4.00 D) $4.36

C.

The Sisyphean Company has a bond outstanding with a face value of $5000 that reaches maturity in 8 years. The bond certificate indicates that the stated coupon rate for this bond is 8.2% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $4541.53 , then the YTM for this bond is closest to ________. A) 7.9% B) 11.9% C) 13.8% D) 9.9%

D) FV = $5000PMT = $205 ($410 /2)N = 16 (8 × 2)PV = -$4541.53Compute I = 4.9426 × 2 = 9.8852 %.