1. Macy's is planning a store expansion by issuing 10-year zero coupon bond that makes semi-annual coupon payments at a rate of 5.875% with a face value of $1,000. Assuming semi-annual compounding, what will be the price of these bonds, if the appropriate yield to maturity (discount rate) is 14%?

2. Carrie wants to invest in five-year bonds that are currently priced at $872.48. These bonds have a coupon rate of 6% and make semiannual coupon payments. What is the current market yield of this bond?

a.What is the current market yield of this bond?

b.Is the bond trading at a premium or discount? Explain.

3. ConEdison Utility Company has four-year bonds outstanding that pay a coupon rate of 6.6% and make coupon payments semiannually. If these bonds are selling at $918.39, what is the yield to maturity that an investor can expect to earn on these bonds?

4.Sprint has issued bonds that will mature in six years and pay an 8% coupon semiannually. If you paid $1,051.98 today and your required return was 6.6%, did you overpay? underpay? Or pay the fair price? Explain.

5. In 2014, AT&T issued 10-year bonds with a coupon that pays $93.75 annually. At the time of issue, the bonds sold at par. Today, bonds of similar risk and maturity must pay an annual coupon of 7.25% to sell at par value. Assuming semi-annual payments and a 7.25% yield to maturity,what is the current price of the firm's bonds?

6. When you were two-years-old,your Grndmother left you a trust fund with $10,000 in it that has been earning 12% for 20 years. How much is in the trust fund now, based on annual compounding?

7. What is the payment to amortize a $10,000 loan over 10 years if the interest rate is 12%?

8. ____refers to the amount of money on which interest is paid.

a. Capital

b. APR

c. Loan Base

d. Principal

9. A young couple wishes to accumulate $35,000 at the end of four years so that they may make a down payment on a house. What should their equal end-of-year deposits be accumulate the $35,000, assuming a 6% rate of interest?

a. $7,718

b. $8,000

c. $6,915

d. $8,765

10. The future value of $3,000 deposited at 11% compounded quarterly for each of the next six years is

a. $5,211

b. $5,611

c. $4,976

d. $5,751

BONUS

1.Low priced, risky bond investments will typically exhibit

a.Lower yields to maturity

b.Higher yields to maturity

2.Generally speaking, longer term bonds have more credit risk than shorter term bonds.

a.True

b.False

3.A bond has a current market price of $1,100, consequently, it is said to be selling at a _____.

a.Discount

b.Bonus

c.Premium

4.The bonds of a company that has posted weak financial results, and may be on the verge of filing for bankruptcy in the near term will likely trade at a

a.Discount

b.Bonus

c.Premium

5.Under normal operating conditions (excluding fraudulent and class-action related liabilities), stock investors can force a company into bankruptcy

a.True

b.False