Question
PLEASE HELP!!!!!!! I keep coming up with the wrong answers to these nine questions! 1. The Garraty Company has two bond issues outstanding. Both bonds
PLEASE HELP!!!!!!! I keep coming up with the wrong answers to these nine questions!
1. The Garraty Company has two bond issues outstanding. Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year.
a. What will be the value of each of these bonds when the going rate of interest is 10%? Assume that there is only one more interest payment to be made on Bond S. Round your answers to the nearest cent.
1. BOND L $ ?????
2. BOND S $ ?????
2. A 30-year, 10% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,100. The bond sells for $1,050. (Assume that the bond has just been issued.)
a. What is the bond's capital gain or loss yield? Loss should be indicated with minus sign. Do not round your intermediate calculations. Round your answer to two decimal places. ???%
3. You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond's yield to maturity? Round your answer to two decimal places. ??? %
4. A bond that matures in 9 years sells for $950. The bond has a face value of $1,000 and a yield to maturity of 9.8764%. The bond pays coupons semiannually. What is the bond's current yield? Do not round intermediate calculations. Round your answer to two decimal places.????%
5. Absalom Motors' 11% coupon rate, semiannual payment, $1,000 par value bonds that mature in 10 years are callable 8 years from now at a price of $1,050. The bonds sell at a price of $1,300, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds? Do not round intermediate calculations. Round your answer to two decimal places. ????%
6. The real risk-free rate is 3%. Inflation is expected to be 3% this year, 4% next year, and then 4.5% thereafter. The maturity risk premium is estimated to be 0.0005 x (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places.
7. Assume that the real risk-free rate, r*, is 2% and that inflation is expected to be 7% in Year 1, 5% in Year 2, and 3% thereafter. Assume also that all Treasury securities are highly liquid and free of default risk. If 2-year and 5-year Treasury notes both yield 10%, what is the difference in the maturity risk premiums (MRPs) on the two notes; that is, what is MRP5 minus MRP2? Round your answer to two decimal places. ???%
8. Suppose Hillard Manufacturing sold an issue of bonds with a 10-year maturity, a $1,000 par value, a 10% coupon rate, and semiannual interest payments.
a. Two years after the bonds were issued, the going rate of interest on bonds such as these fell to 8%. At what price would the bonds sell? Round the answer to the nearest cent.
b. Suppose that 2 years after the initial offering, the going interest rate had risen to 15%. At what price would the bonds sell? Round the answer to the nearest cent.
9. Arnot International's bonds have a current market price of $1,250. The bonds have an 12% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may be called in 5 years at 109% of face value (Call price = $1,090).
a. What is the yield to maturity? Round your answer to two decimal places.
b. What is the yield to call, if they are called in 5 years? Round your answer to two decimal places.
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