Microsoft Word - FIN 110 Fixed Income Questions

1. XYZ Corporation issued a 30 year, 7% annual coupon bond five years ago. The current yield to maturity of bonds with similar risk is 6% annually. Assume that the bond was issued at par value.
   1. What is the current price of the bond? Is it trading at a premium, discount or at par?
   2. Suppose that interest rates rose to 8% annually, what is the new price of the bond? Is it trading at a premium, discount or at par?
   3. Suppose that interest rates rose to 7% annually, what is the new price of the bond? Is it trading at a premium, discount or at par?
2. XYZ Corporation has just issued a 10 year, 10% semi-annual coupon bond. The current yield to maturity of bonds with similar risk is 8% annually. Assume that the bond was issued at par value.
   1. What is the current price of the bond?
   2. If the bond was trading for $925, what would be the current yield to maturity?
   3. If the bond was trading for $1025, what would be the current yield to maturity?
3. XYZ Corporation has just issued a 20 year, 8% annual coupon bond that is callable after five years at a price of $1,075. The current yield to maturity of bonds with similar risk is 8% annually. Assume that the bond was issued at par value.
   1. What is the yield to call if the bond was called 5 years after issuance?
   2. What is the yield to call if the bond was called 10 years after issuance?
4. XYZ Corporation has just issued a 10 year, zero-coupon bond with a yield to maturity of 5% annually. Assume that the bond has a face value of $1,000.
   1. What is the current price of the bond at issuance?
   2. What would the price of the bond at issuance be if the yield to maturity was 7%?