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

Question

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

Accepted Answer

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	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.

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

	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.

Question

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

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	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