Absalom Motorss 8.60% coupon rate, semiannual payment, $1,000 par value bonds that mature in 25 years are callable 10 years from now at a price of $1,086. The bonds sell at a price of $1,250, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds?

Question 15 options:

5.90%

2.95%

8.60%

6.55%

3.28%

Suppose Hillard Manufacturing sold an issue of bonds with a 30-year maturity, a $1,000 par value, a 7.50% coupon rate, and semiannual interest payments. Three years after the bonds were issued, the going rate of interest on bonds such as these fell to 6.00%. At what price would the bonds sell?

Question 18 options:

$1,147.00

$1,000.00

$1,198.16

$1,206.47

$1,199.33

Kaufman Enterprises has bonds outstanding with a $1,000 face value and 28 years left until maturity. They have an 11% annual coupon payment, and their current price is $1,300. The bonds may be called in 21 years at 103% of face value. a. What is the yield to maturity? b. What is the yield to call?

Question 19 options:

a) 8.23%; b) 8.05%

a) 8.05%; b) 8.23%

a) 11.00%; b) 8.23%

a) 8.05%; b) 11.00%

Suppose you and most other investors expect the inflation rate to be 3.00% next year,4.00% during the following year, and then to remain at a rate of 5.00% thereafter. Assume that the real risk-free rate will remain at 1.00% and that maturity risk premiums on Treasury securities rise from zero on very short- term securities to a level of 0.10%percentage points for 1-year securities. Furthermore, maturity risk premiums increase0.10 percentage points for each year to maturity, up to a limit of 1.00 percentage point on 10-year or longer-term T-notes and T-bonds. Calculate the interest rate on a 7-year Treasury securities.

Question 20 options:

	6.27%
	6.47%
	6.07%
	6.67%