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Financial Questions




Question;1. Interpreting Bond Yields. Is the yield to maturity on a;bond the same thing as the required return? Is YTM the same thing as the coupon;rate? Suppose today a 10 percent coupon bond sells at par. Two years from now;the required return on the same bond is 8 percent. What is the coupon rate on;the bond now? The YTM?;LO 2;2. Interpreting Bond Yields. Suppose you buy a 7 percent;coupon, 20-year bond today when it?s first issued. If interest rates suddenly;rise to 15 percent, what happens to the value of your bond? Why?;LO 2;3. Bond Prices. Lycan, Inc., has 7 percent coupon bonds on;the market that have 9 years left to maturity. The bonds make annual payments.;If the YTM on these bonds is 8 percent, what is the current bond price?;4. Bond Yields. The Timberlake-Jackson Wardrobe Co. has 7;percent coupon bonds on the market with nine years left to maturity. The bonds;make annual payments. If the bond currently sells for $1,1038.50, what is its;YTM?;5. Coupon Rates. Merton Enterprises has bonds on the market;making annual payments, with 12 years to maturity, and selling for $963. At;this price, the bonds yield 7.5 percent. What must the coupon rate be on;Merton?s bonds?;6. Bond Prices. App Store Co. issued 20-year bonds one year;ago at a coupon rate of 6.1 percent. The bonds make semiannual payments. If the;YTM on these bonds is 5.3 percent, what is the current bond price?;7. Bond Yields. Night Hawk Co. issued 15-year bonds two;years ago at a coupon rate of 6.9 percent. The bonds make semiannual payments.;If these bonds currently sell for 94 percent of par value, what is the YTM?;8. Coupon Rates. Osbourne Corporation has bonds on the;market with 10.5 years to maturity, a YTM of 8.4 percent, and a current price;of $945. The bonds make semiannual payments. What must the coupon rate be on;the bonds?;9. Calculating Real Rates of Return. If Treasury bills are;currently paying 4.1 percent and the inflation rate is 1.6 percent, what is the approximate real rate of;interest? The exact real rate?;10. Inflation and Nominal Returns. Suppose the real rate is 2.8;percent and the inflation rate is 3.4 percent. What rate would you expect to;see on a Treasury bill?;11. Nominal and Real Returns. An investment offers a 14;percent total return over the coming year. Bill Bernanke thinks the total real;return on this investment will be only 10 percent. What does Bill believe the;inflation rate will be over the next year?;12. Nominal versus Real Returns. Say you own an asset that;had a total return last year of 15 percent. If the inflation rate last year was;2.5 percent, what was your real return?;13. Using Treasury Quotes. Locate the Treasury issue in Figure;6.3 maturing in August 2029. What is its coupon rate? What is its bid price?;What was the previous day?s asked price?


Paper#49151 | Written in 18-Jul-2015

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