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Question;[i]. The current price of a;10-year, $1,000 par value bond is $1,158.91. Interest on this bond is paid;every six months, and the nominal annual yield is 14 percent. Given these facts, what is the annual coupon;rate on this bond?;a. 10%;b. 12%;c. 14%;d. 17%;e. 21%;Tough;[ii]. Recently, Ohio Hospitals;Inc. filed for bankruptcy. The firm was;reorganized as American Hospitals Inc., and the court permitted a new indenture;on an outstanding bond issue to be put into effect. The issue has 10 years to maturity and a;coupon rate of 10 percent, paid annually. The new agreement allows the firm to;pay no interest for 5 years. Then, interest payments will be resumed for the;next 5 years. Finally, at maturity (Year;10), the principal plus the interest that was not paid during the first 5 years;will be paid. However, no interest will;be paid on the deferred interest. If the;required annual return is 20 percent, what should the bonds sell for in the;market today?;a. $242.26;b. $281.69;c. $578.31;d. $362.44;e. $813.69;[iii]. GP&L sold $1,000,000 of;12 percent, 30-year, semiannual payment bonds 15 years ago. The bonds are not callable, but they do have;a sinking fund which requires GP&L to redeem 5 percent of the original face;value of the issue each year ($50,000), beginning in Year 11. To date, 25 percent of the issue has been;retired. The company can either call;bonds at par for sinking fund purposes or purchase bonds on the open market;spending sufficient money to redeem 5 percent of the original face value each;year. If the nominal yield to maturity;(15 years remaining) on the bonds is currently 14 percent, what is the least amount of money GP&L;must put up to satisfy the sinking fund provision?;a. $43,856;b. $50,000;c. $37,500;d. $43,796;e. $39,422;Financial Calculator Section;Multiple Choice: Problems;[iv]. A corporate bond with a $1,000 face value pays a $50 coupon;every six months. The bond will mature;in ten years, and has a nominal yield to maturity of 9 percent. What is the price of the bond?;a. $ 634.86;b. $1,064.18;c. $1,065.04;d. $1,078.23;e. $1,094.56;[v]. A bond with a $1,000 face;value and an 8 percent annual coupon pays interest semiannually. The bond will mature in 15 years. The nominal yield to maturity is 11;percent. What is the price of the bond;today?;a. $ 784.27;b. $ 781.99;c. $1,259.38;d. $1,000.00;e. $ 739.19;[vi]. Palmer Products has;outstanding bonds with an annual 8 percent coupon. The bonds have a par value;of $1,000 and a price of $865. The bonds;will mature in 11 years. What is the;yield to maturity on the bonds?;a. 10.09%;b. 11.13%;c.;9.25%;d.;8.00%;e.;9.89%;[vii]. A corporate bond matures in;14 years. The bond has an 8 percent;semiannual coupon and a par value of $1,000.;The bond is callable in five years at a call price of $1,050. The price of the bond today is $1,075. What are the bond?s yield to maturity and;yield to call?;a. YTM;= 14.29%, YTC = 14.09%;b. YTM;= 3.57%, YTC = 3.52%;c. YTM;= 7.14%, YTC = 7.34%;d. YTM;= 6.64%, YTC = 4.78%;e. YTM;= 7.14%, YTC = 7.05%;[viii]. A 12-year bond pays an annual;coupon of 8.5 percent. The bond has a;yield to maturity of 9.5 percent and a par value of $1,000. What is the bond?s current yield?;a.;6.36%;b.;2.15%;c.;8.95%;d.;9.14%;e. 10.21%;[ix]. A bond matures in 12 years;and pays an 8 percent annual coupon. The;bond has a face value of $1,000, and currently sells for $985. What is the bond?s current yield and yield to;maturity?;a. Current yield = 8.00%, yield;to maturity = 7.92%.;b. Current yield = 8.12%, yield;to maturity = 8.20%.;c. Current yield = 8.20%, yield;to maturity = 8.37%.;d. Current yield = 8.12%, yield;to maturity = 8.37%.;e. Current yield = 8.12%, yield;to maturity = 7.92%.;[x]. A corporate bond has a;face value of $1,000, and pays a $50 coupon every six months (i.e., the bond;has a 10 percent semiannual coupon). The;bond matures in 12 years and sells at a price of $1,080. What is the bond?s nominal yield to maturity?;a. 8.28%;b. 8.65%;c. 8.90%;d. 9.31%;e. 10.78%;[xi]. A 20-year bond with a par;value of $1,000 has a 9 percent annual coupon. The bond currently sells for;$925. If the bond?s yield to maturity;remains at its current rate, what will be the price of the bond 5 years from;now?;a. $ 966.79;b. $ 831.35;c. $1,090.00;d. $ 933.09;e. $ 925.00...

Paper#50970 | Written in 18-Jul-2015

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