HW 3b:

1. LLP Corporations bond will mature in 13 years. The bonds have a face value of $1000 and an 8% coupon rate, paid semiannually. The price of the bonds is $1096. What is bonds yield to maturity?

2. You just purchased a bond that matures in 5 years. The bond has a face value of $1000, an 8% annual coupon, and has a current yield of 8.21 percent. What is bonds yield to maturity?
3. A bond that matures in 7 years sells for $1020. The bond has a face value of $1000 and a yield to maturity of 10.5883 percent. The bond pays coupons semiannually. What is the bonds current yield?
4. Last year you purchased a $1000 face value corporate bond with an 11% annual coupon rate and a 10-year maturity. At the time of the purchase, the bond had an expected yield to maturity of 9.79%, and today you sold the bond for $1060.49. What is the one-period return that you earned on this investment?

5. ABC Corp. has bonds outstanding with 9 years left to maturity. The bonds have an 8% annual coupon rate and were issued last year at par value of $1,000 but due to changes in interest rates, each bonds value has fallen to $901.40. The capital gains yield earned by investors over the last year was -9.86 percent.

1. What is expected current yield for the next year?
2. What is the yield to maturity?
3. What is expected capital gains yield for the next year if interest rates do not change?

6. An investor has two bonds in his portfolio. Each bond matures in 4 years, has a face value of $1000, and has a yield to maturity equal to 9.6%. One bond, Bond C, pays an annual coupon of 10%, the other bond, Bond Z, is a zero-coupon bond. Assuming that the yield to maturity of each bond remains at 9.6 percent over the next 4 years, what will be the price of each of the bonds at the following time periods?

7. Sure Tea Co. has issued 9% annual coupon bonds that are now selling at a yield to maturity of 10% and current yield of 9.8375%. What is the remaining maturity of these bonds?