Question
Issuer Symbol Callable Coupon _rate Maturity Moody Rating Price Yield MMM BRK3680632 Yes 7% 10/21/2030 Aa3 120 _____ a, This bond is callable. This means
Issuer Symbol Callable Coupon _rate Maturity Moody Rating Price Yield
MMM BRK3680632 Yes 7% 10/21/2030 Aa3 120 _____
a, This bond is callable. This means that
- MMM bondholders can convert bond to stocks when the bond is called.
- MMM company is expected to call back this bond when the market interest rate decreases.
- MMM is expected to call back this bond when MMM stock price increases.
- MMM is expected to call back this bond when MMM stock price decreases.
b, The coupon rate is 7% annually. How much is the annual coupon?
- $0.7
- $7
- $70
- $700
c, Moodys rating of this bond is Aa3. Who is Moody? What about the ranking, Aa3?
- Moody is MMMs financial partner. Aa3 is a low ranking.
- Moody is a bank. Aa3 is a low ranking.
- Moody is a mutual fund. Aa3 is a top ranking.
- Moody is a bond ranking agency. Aa3 is a top ranking.
d, The current market price of this bond is 120, meaning the bond is traded at 120%*1000=$1200 in the market. This annual bond pays annual coupon at coupon rate of 7%. The bond has 10 years left to maturity. Calculate the yield to maturity (yield) of this bond? (hint: use rate function and consider this is an annual coupon bond)
- 4.07%
- 4.48%
- 5.08%
- 4.11%
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