A bond has a coupon rate of 8.125%, a maturity of 12.5 years, a face value of $1,000, and makes semiannual payments. If the price is $934, what is the ANNUAL yield to maturity on the bond?

8.125%

9.016%

4.518%

8.98%

None of the above

[CONCEPT PROBLEM] Assume that all interest rates in the economy decline from 10 percent to 6 percent. Which of the following bonds will experience the HIGHEST PERCENTAGE INCREASE in price?

	A 10-year bond with a 10 percent coupon.
	An 8-year bond with a 9 percent coupon.
	A 10-year zero coupon bond.
	A 1-year bond with a 15 percent coupon.
	A 3-year bond with a 10 percent coupon.

If a warrant is attached to a bond,

the bondholder has a right, not an obligation, to sell the bonds back to the issuer at a stated price

the bondholder has a right, not an obligation, to buy the issuing firm's stock at a predefined price

the issuer has a right to convert the bonds to a predefined number of shares of its stock at a pre-determined date

the bond holder has a right, not an obligation, to convert his/her bonds into shares of the issuing firm's common stock at a fixed price

none of the above

Call provisions typically require bond issuers to pay investors an amount greater than the par value, called

	call premium
	sinking fund
	refunding operations
	call protection

A bond has a coupon rate of 8%, a maturity of 10 years, a face value of $1,000, and makes semiannual payments. If the price is $934.96, what is the annual nominal yield to maturity on the bond?

	8.39%
	9.64%
	4.41%
	8.98%
	None of the above

Which of the following statements is most correct?

	Junk bonds typically carry a lower yield to maturity than investment grade bonds.
	A debenture is a secured bond which is backed by some or all of the firm's fixed assets.
	All else equal, subordinated bonds typically carry lower yields than mortgage bonds.
	All else equal, convertible bonds are less valuable than straight bonds
	None of the above statements is correct.

A convertible bond gives:

	the bondholder the right, not an obligation, to sell the bonds back to the issuer at a stated price
	the bond holder has a right, not an obligation, to buy the issuing firm's stock at a predefined price
	the issuer has a right to convert the bonds to a predefined number of shares of its stock at a pre-determined date
	the bond holder has a right, not an obligation, to convert his/her bonds into shares of the issuing firm's common stock at a fixed price
	none of the above

For the next 2 question. New York Waste (NYW) is considering refunding a $50,000,000, annual payment, 14.5% coupon, 30-year bond issue that was issued 5 years ago. It has been amortizing $3 million of flotation costs on these bonds over their 30-year life. The company could sell a new issue of 25-year bonds at an annual interest rate of 11.67% in today's market. A call premium of 14% would be required to retire the old bonds, and flotation costs on the new issue would be $3 million. The company's marginal tax rate is 40%. The new bonds would be issued when the old bonds are called.

Calculate the after-tax annual INTEREST SAVINGS if the refunding takes place.

What is the NPV if the bonds are refunded today?