Question
Hello I need help with the following Finance questions please. Q1.) A General Power bond carries a coupon rate of 8.7%, has 9 years until
Hello I need help with the following Finance questions please.
Q1.) A General Power bond carries a coupon rate of 8.7%, has 9 years until maturity, and sells at a yield to maturity of 7.7%. (Assume annual interest payments.)
a.What interest payments do bondholders receive each year?
b.At what price does the bond sell?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price: ?
c.What will happen to the bond price if the yield to maturity falls to 6.7%?(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Price will ___?____ by _____?_______
Q2.) Consider three bonds with 5.90% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years.
a.What will be the price of the 4-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
b.What will be the price of the 8-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
c.What will be the price of the 30-year bond if its yield increases to 6.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
d.What will be the price of the 4-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
e.What will be the price of the 8-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
f.What will be the price of the 30-year bond if its yield decreases to 4.90%?(Do not round intermediate calculations. Round your answers to 2 decimal places.)
Bond Price: ?
Q2.)
a.Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 6.4%. Now, with 6 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 12%. What is the price of the bond now? (Assume semiannual coupon payments.)(Do not round intermediate calculations. Round your answer to 2 decimal places.)
Bond Price: ?
b.Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 80% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Yield to Maturity: ?
Q3.) One bond has a coupon rate of 7.8%, another a coupon rate of 9.4%. Both bonds pay interest annually, have 7-year maturities, and sell at a yield to maturity of 7.0%.
a.If their yields to maturity next year are still 7.0%, what is the rate of return on each bond?(Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.)
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