Question
Please show work! 1) Tigers, Inc. decides to issue $1,000 bonds with 5 years to maturity. The coupon rate is 10 percent, paid annually. The
Please show work!
1) Tigers, Inc. decides to issue $1,000 bonds with 5 years to maturity. The coupon rate is 10 percent, paid annually. The yield to maturity is also 10%. What is the price of a Tigers, Inc. bond?
A) Now, assume the yield to maturity (i.e., the market interest rates) rises to 12 percent. What is the price of the bond now?
B) Now, assume the yield to maturity (i.e., the market interest rates) falls to 8 percent. What is the price of the bond now?
C) Assume the yield to maturity is 10 percent. What is the price of the bond if the coupon payments were made semiannually?
2) You just purchased a Chick-fil-a bond for $1,050. The bond has a $1,000 face value and an 8% coupon rate, paid semiannually. The bond matures in 10 years. What is its yield to maturity?
3) There are two $1,000 bonds identical in every way (i.e., same risk) except for their coupons and their prices. Both have 3 years to maturity and annual coupons.
A) The first has an 8 percent coupon rate and sells for $974.69. What is its yield to maturity (YTM)?
B) The second bond has a 10 percent coupon rate. If it has the same YTM as the first bond, what is its price?
4) What is the price of a zero-coupon bond that has a face value of $1,000 and matures in 10 years, if the YTM is 8%?
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