Assume that 10 years later, due to bad publicity, the risk premium is now 7 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 have remaining until maturity. Compute the new price of the bond. Lance Whittingham IV specializes is buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 4 percent annual interest and has 18 years remaining to maturity. The current yield to maturity on similar bonds of the bonds? What is the current price of the bonds? By what percent will the price of the bonds increase between now and maturity? What is the annual compound rate of growth in the value of the bonds? (An approximate answer is acceptable.) Bonds issued by the Coleman Manufacturing Company have a par value of $1,000, which of course is also the amount of principal to be paid at maturity. The bonds are currently selling for $690. They have 10 years remaining to maturity. The annual interest payment is 13 percent ($130). Compute the yield to maturity. Stilley Resources bonds have four year left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 5 percent. If the price of the bond is $841.51, what is the yield to maturity? Evans Emergency Response bonds have six years to maturity. Interest is paid semiannually. The bonds have a $1,000 par value and a coupon rate of 8 percent. If the price of the bond is $1, 073.55, what is the annual yield to maturity? For the next two problems, assume interest payments are on a semiannual basis. Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 11 percent and the interest is paid semiannually. The yield to maturity. Compute the price of the bonds based on semiannual analysis. You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of Assume that 10 years later, due to bad publicity, the risk premium is now 7 percent and is appropriately reflected in the required return (or yield to maturity) of the bonds. The bonds have 15 have remaining until maturity. Compute the new price of the bond. Lance Whittingham IV specializes is buying deep discount bonds. These represent bonds that are trading at well below par value. He has his eye on a bond issued by the Leisure Time Corporation. The $1,000 par value bond pays 4 percent annual interest and has 18 years remaining to maturity. The current yield to maturity on similar bonds of the bonds? What is the current price of the bonds? By what percent will the price of the bonds increase between now and maturity? What is the annual compound rate of growth in the value of the bonds? (An approximate answer is acceptable.) Bonds issued by the Coleman Manufacturing Company have a par value of $1,000, which of course is also the amount of principal to be paid at maturity. The bonds are currently selling for $690. They have 10 years remaining to maturity. The annual interest payment is 13 percent ($130). Compute the yield to maturity. Stilley Resources bonds have four year left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 5 percent. If the price of the bond is $841.51, what is the yield to maturity? Evans Emergency Response bonds have six years to maturity. Interest is paid semiannually. The bonds have a $1,000 par value and a coupon rate of 8 percent. If the price of the bond is $1, 073.55, what is the annual yield to maturity? For the next two problems, assume interest payments are on a semiannual basis. Heather Smith is considering a bond investment in Locklear Airlines. The $1,000 par value bonds have a quoted annual interest rate of 11 percent and the interest is paid semiannually. The yield to maturity. Compute the price of the bonds based on semiannual analysis. You are called in as a financial analyst to appraise the bonds of Olsen's Clothing Stores. The $1,000 par value bonds have a quoted annual interest rate of
