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1. Award: 5.00 points A Japanese company has a bond outstanding that sells for 96 percent of its 100,000 par value. The bond has a coupon rate of 6.30 percent paid annually and matures in 19 years. What is the yield to maturity of this bond? (Round your answer to 2 decimal places. (e.g., 32.16)) % Yield to maturity References WorksheetDifficulty: BasicLearning Objective: 07-02 Bond values and yields and why they fluctuate. 2. Award: 5.00 points Ninja Co. issued 10-year bonds a year ago at a coupon rate of 8.2 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.5 percent, what is the current bond price? (Round your answer to 2 decimal places. (e.g., 32.16)) Current bond price $ References WorksheetDifficulty: BasicLearning Objective: 07-02 Bond values and yields and why they fluctuate. 3. Award: 5.00 points Stone Sour Corp. issued 20-year bonds 8 years ago at a coupon rate of 8.10 percent. The bonds make semiannual payments. If these bonds currently sell for 102 percent of par value, what is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16)) YTM % rev: 03_27_2015_QC_CS-11957 References WorksheetDifficulty: BasicLearning Objective: 07-02 Bond values and yields and why they fluctuate. 4. Award: 5.00 points An investment offers a 13 percent total return over the coming year. Fred Bernanke thinks the total real return on this investment will be only 9 percent. What does Fred believe the inflation rate will be over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Inflation rate % References WorksheetDifficulty: BasicLearning Objective: 07-04 The impact of inflation on interest rates. 5. Award: 5.00 points Bond J is a 7 percent coupon bond. Bond K is a 13 percent coupon bond. Both bonds have 15 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price change of these bonds? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))) Percentage change in price of Bond J Percentage change in price of Bond K % % What if rates suddenly fall by 2 percent instead? (Round your answers to 2 decimal places. (e.g., 32.16)) % Percentage change in price of Bond J Percentage change in price of Bond K % References WorksheetDifficulty: IntermediateLearning Objective: 07-02 Bond values and yields and why they fluctuate. 6. Award: 5.00 points Coccia Co. wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 6 percent coupon bonds on the market that sell for $1,055, make semiannual payments, and mature in 18 years. What coupon rate should the company set on its new bonds if it wants them to sell at par? (Round your answer to 2 decimal places. (e.g., 32.16)) Coupon rate % References WorksheetDifficulty: IntermediateLearning Objective: 07-02 Bond values and yields and why they fluctuate. 7. Award: 5.00 points You purchase a bond with a coupon rate of 9.3 percent and a clean price of $880. If the next semiannual coupon payment is due in two months, what is the invoice price? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) $ Invoice price References WorksheetDifficulty: IntermediateLearning Objective: 07-02 Bond values and yields and why they fluctuate. 8. Award: 5.00 points Backwater Corp. has 7 percent coupon bonds making annual payments with a YTM of 6.4 percent. The current yield on these bonds is 6.75 percent. How many years do these bonds have left until they mature? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) years Maturity of bond References WorksheetDifficulty: IntermediateLearning Objective: 07-02 Bond values and yields and why they fluctuate. 9. Award: 5.00 points Bond P is a premium bond with a 10 percent coupon. Bond D is a 5 percent coupon bond currently selling at a discount. Both bonds make annual payments, have a YTM of 7 percent, and have five years to maturity. What is the current yield for bond P and bond D? (Round your answers to 2 decimal places. (e.g., 32.16)) Current yield Bond P Bond D % % If interest rates remain unchanged, what is the expected capital gains yield over the next year for bond P and bond D? (Negative amount should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16))) Bond P Capital gains yield % Bond D % References WorksheetDifficulty: ChallengeLearning Objective: 07-02 Bond values and yields and why they fluctuate. 10. Award: 5.00 points The YTM on a bond is the interest rate you earn on your investment if interest rates don't change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). a. Suppose that today you buy a bond with an annual coupon of 8 percent for $1,030. The bond has 17 years to maturity. What rate of return do you expect to earn on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) % Expected rate of return b1. Two years from now, the YTM on your bond has declined by 1 percent, and you decide to sell. What price will your bond sell for? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Bond price $ b2. What is the HPY on your investment? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) % HPY rev: 10_16_2012 References WorksheetDifficulty: ChallengeLearning Objective: 07-02 Bond values and yields and why they fluctuate. 11. Award: 5.00 points Las Paletas Corporation has two different bonds currently outstanding. Bond M has a face value of $50,000 and matures in 20 years. The bond makes no payments for the first six years, then pays $2,600 every six months over the subsequent eight years, and finally pays $2,900 every six months over the last six years. Bond N also has a face value of $50,000 and a maturity of 20 years; it makes no coupon payments over the life of the bond. The required return on both these bonds is 10 percent compounded semiannually. What is the current price of bond M and bond N? (Round your answers to 2 decimal places. (e.g., 32.16)) Bond M Bond N Current price $ $ References WorksheetDifficulty: ChallengeLearning Objective: 07-02 Bond values and yields and why they fluctuate. 12. Award: 5.00 points You are planning to save for retirement over the next 30 years. To save for retirement, you will invest $1,450 a month in a stock account in real dollars and $570 a month in a bond account in real dollars. The effective annual return of the stock account is expected to be 10 percent, and the bond account will earn 6 percent. When you retire, you will combine your money into an account with a 7 percent effective return. The inflation rate over this period is expected to be 3 percent. How much can you withdraw each month from your account in real terms assuming a 25-year withdrawal period? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Monthly withdrawal $ What is the nominal dollar amount of your last withdrawal? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Last withdrawal $ References WorksheetDifficulty: ChallengeLearning Objective: 07-04 The impact of inflation on interest rates. 2016 McGraw-Hill Education. All rights reserved