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Chapter 6 Homework i on-con&external_browser=0&launchUrl=https%253A%2525%252Fne... G Saved Help Save & Exit 2 Check A General Power bond carries a coupon rate of 9.7%, has 9 years until maturity, and sells at a yield to maturity of 8.7%. (Assume annual interest payments.) a. What interest payments do bondholders receive each year? points b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What will happen to the bond price if the yield to maturity falls to 7.7%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) eBook d. If the yield to maturity falls to 7.7%, will the current yield be less, or more, than the yield to maturity? Hint Print a Interest payments b Price Price will by d. Current yield is than yield to maturity AGE Mc Graw HILL L Type here to searchnework G Saved Help Save & Ex 3 Che One bond has a coupon rate of 6.8%, another a coupon rate of 8.4%. Both bonds pay interest annually, have 8-year maturities, and sell at a yield to maturity of 7.0% a. If their yields to maturity next year are still 7.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Ints Enter your answers as a percent rounded to 1 decimal place.) Bond 1 Bond 2 eBook Rate of return % % Print b. Does the higher-coupon bond give a higher rate of return over this period? Yes O No Saved Help Save & Exit Submit 4 Check my work General Matter's outstanding bond issue has a coupon rate of 8.4%, and it sells at a yield to maturity of 7.50%. The firm wishes to issue additional bonds to the public. What coupon rate must the new bonds offer in order to sell at face value? (Enter your answer as a percent rounded to 2 decimal places.) nts Coupon rate % eBook Print Mc Graw O E ype here to searchSaved 5 Save & Exit Check my Consider three bonds with 5.40% coupon rates, all making annual coupon payments and all selling at face value. The short-term bond has a maturity of 4 years, the intermediate-term bond has a maturity of 8 years, and the long-term bond has a maturity of 30 years. points a. What will be the price of the 4-year bond if its yield increases to 6.40%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What will be the price of the 8-year bond if its yield increases to 6.40%? (Do not round intermediate calculations. Round your eBook answer to 2 decimal places.) c. What will be the price of the 30-year bond if its yield increases to 6.40%? (Do not round intermediate calculations. Round your Hint answer to 2 decimal places.) d. What will be the price of the 4-year bond if its yield decreases to 4.40%? (Do not round intermediate calculations. Round your Print answer to 2 decimal places.) e. What will be the price of the 8-year bond if its yield decreases to 4.40%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) f. What will be the price of the 30-year bond if its yield decreases to 4.40%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) g. Comparing your answers to parts (a), (b), and (c). are long-term bonds more or less affected than short-term bonds by a rise in interest rates? h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a decline in interest rates? a Bond price b Bond price C. Bond price Mc Graw L O Type here to search0 2 decimal places.) ecreases to 4.40%? (Do not round intermediate calculations. Round f. What will be the price of the 30-year bond if its yield decreases to 4.40%? (Do not round intermediate calculations. Round answer to 2 decimal places.) points g. Comparing your answers to parts (a). (b), and (c). are long-term bonds more or less affected than short-term bonds by a rise interest rates? interest rates? h. Comparing your answers to parts (d), (e), and (f), are long-term bonds more or less affected than short-term bonds by a dec eBook Hint a Bond price Print b Bond price C. Bond price d Bond price Bond price f. Bond price affected than short-term bonds 9 Long-term bonds h . Long-term bonds affected than short-term bonds Mc Graw HILL L O O Type here to searchO The following table shows the prices of a sample of Treasury strips. Each strip makes a single payment at maturity. Years to points Maturity Price, (% of face value) 97 .752% A W I 94 . 251 90 . 444 eBook 86 . 380 Print a. What is the 1-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) places.) b. What is the 2-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) c. What is the 3-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal d. What is the 4-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? a. Interest rate b Interest rate C. Interest rate
MIC Graw L O Type here to searchSaved Help 6 Save & E b. What is the 2-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal Cha places.) places.) c. What is the 3-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal points places.) d. What is the 4-year interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the.usual shape of the yield curve? eBook Print a. Interest rate b Interest rate C. Interest rate d. Interest rate e. Is the yield curve upward-sloping, downward-sloping, or flat? f. Is this the usual shape of the yield curve? Mc Grow L Hill Type here to searchSaved 7 Help Save & Exit Check my w a. Several years ago, Castles in the Sand Inc. issued bonds at face value of $1,000 at a yield to maturity of 5.6%. Now, with 5 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 13% What points is the price of the bond now? (Assume semiannual coupon payments.) (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bond price eBook Print b. Suppose that investors believe that Castles can make good on the promised coupon payments but that the company will go bankrupt when the bond matures and the principal comes due. The expectation is that investors will receive only 82% of face value at maturity. If they buy the bond today, what yield to maturity do they expect to receive? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Yield to maturity
