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Question;[1]. Meade Corporation bonds;mature in 6 years and have a yield to maturity of 8.5 percent. The par value of the bonds is $1,000. The bonds have a 10 percent coupon rate and;pay interest on a semiannual basis. What;are the current yield and capital gains yield on the bonds for this year?;(Assume that interest rates do not change over the course of the year).;a. Current yield =;8.50%, capital gains yield = 1.50%;b. Current yield =;9.35%, capital gains yield = 0.65%;c. Current yield =;9.35%, capital gains yield = -0.85%;d. Current yield = 10.00%, capital gains yield =;0.00%;e. None of the answers above is correct.;[2]. A 6-year bond which pays 8;percent interest semiannually sells at par ($1,000). Another 6-year bond of equal risk pays 8;percent interest annually. Both bonds;are non-callable and have a face value of $1,000. What is the price of the bond;which pays annual interest?;a. $689.08;b. $712.05;c. $980.43;d. $986.72;e. $992.64;[3]. Assume that McDonald's and;Burger King have similar $1,000 par value bond issues outstanding. The bonds;are equally risky. The Burger King bond has an annual coupon rate of 8 percent and matures 20 years from;today. The McDonald's bond has a coupon rate of 8 percent, with interest paid semiannually, and it also matures;in 20 years. If the nominal required;rate of return, rd, is 12 percent, semiannual basis, for both bonds, what is the difference in;current market prices of the two bonds?;a. No difference.;b. $ 2.20;c. $ 3.77;d. $17.53;e. $ 6.28;[4]. You are considering;investing in a security that matures in 10 years with a par value of;$1,000. During the first five years, the;security has an 8 percent coupon with quarterly payments (i.e., you receive $20;a quarter for the first 20 quarters).;During the remaining five years the security has a 10 percent coupon;with quarterly payments (i.e., you receive $25 a quarter for the second 20;quarters). After 10 years (40 quarters);you receive the par value.;Another 10-year bond has an 8 percent;semiannual coupon (i.e., the coupon payment is $40 every six months). This bond is selling at its par value;$1,000. This bond has the same risk as;the security you are thinking of purchasing.;Given this information, what should be the price of the security you are;considering purchasing?;a. $ 898.65;b. $1,060.72;c. $1,037.61;d. $ 943.22;e. $1,145.89;[5]. Fish & Chips Inc. has;two bond issues outstand?ing, and both sell for $701.22. The first issue has an annual coupon rate of;8 percent and 20 years to maturity. The;second has an identical yield to maturity as the first bond, but only 5 years;until maturity. Both issues pay interest;annually. What is the annual interest;payment on the second issue?;a. $120.00;b. $ 37.12;c. $ 56.42;d. $ 29.68;e. $ 11.16;[6]. Semiannual payment bonds;with the same risk (Aaa) and maturity (20 years) as your company's bonds have a;nominal (not EAR) yield of 9 percent.;Your company's treasurer is thinking of issuing at par some $1,000 par;value, 20-year, quarterly payment;bonds. She has asked you to determine;what quarterly interest;payment, in dollars, the company would have to set in order to provide the same;effective annual rate (EAR) as those on the 20-year, semiannual payment;bonds. What would the quarterly interest;payment be, in dollars?;a. $45.00;b. $25.00;c. $22.25;d. $27.50;e. $23.00


Paper#50997 | Written in 18-Jul-2015

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