1. Suppose a 12% coupon bond sells at par today; and three years from today, the required rate on the same bond is 8%. What is the coupon rate on the bond today and what will it be 3 years from today. What is the par value today and what will it be three years from today?
2. XYZ Corp. needs to raise funds to finance a plant expansion. Mgt. decided to issue 25-year zero coupon bonds to raise the money. The required rate of return is 5%. What will these bonds sell at issuance?
3. ABC Corp. has 6% coupon bonds on the market that have 8 years left to maturity. The bonds make annual payments. If the yield to maturity is 7%, what is the current bond price?
4. What happens to the price of a three-year bond with an 8% coupon when interest rates change from 8% to 6%? How much will it change from par?
5. GHI Corp. has bonds on the market making annual payments, with 15 years to maturity and selling for $1,103.78. At this price the bond's current yield is 5.44%. What is the coupon rate for this bond?
6. Write down the current prime rate, 15-year mortgage rate, the 3 month T-Bill rate and the 5-year T-Bond rate (for the USA). Are you surprised?
7. In a recent issue of The Wall Street Journal the following Treasury bond quote was published:
|
Rate
|
Maturity Mo/Yr
|
Bid
|
Asked
|
Change
|
Ask yield
|
|
3 1/8
|
Apr 09 n
|
99:25
|
99:26
|
-2
|
3.24
|
What do these numbers mean?
8. Two years ago bonds were issued with 10 years until maturity, selling at par, and a 7% coupon. If interest rates for that grade of bond are currently 8.25%, what will be the market price of these bonds?