Question 1

Gugenheim, Inc. offers a 7 percent coupon bond with annual payments. The yield to maturity is 9.5 percent and the maturity date is 5 years. What is the market price of a $1,000 face value bond?

10 points

Question 2

A bond that pays interest annually yields a 6.38 percent rate of return. The inflation rate for the same period is 4.89 percent. What is the real rate of return on this bond? (Use the exact relationship between interest rates and inflation, not the approximate one. Enter answer in percents, not in decimals.)

10 points

Question 3

The outstanding bonds of Roy Thomas, Inc. provide a real rate of return of 3.51 percent. The current rate of inflation is 3.75 percent. What is the nominal rate of return on these bonds? (Use the exact relationship between rates of return and inflation. Provide answer in percents, not in decimals.)

10 points

Question 4

The nominal rate of return on the bonds of Stu's Boats is 6.53 percent. The real rate of return is 4.56 percent. What is the rate of inflation? (Use the exact relationship between rates of return and inflation. Provide answer in percents, not in decimals.)

10 points

Question 5

The MerryWeather Firm wants to raise $15 million to expand its business. To accomplish this, the firm plans to sell 16-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 8.4 percent. What is the minimum number of bonds the firm must sell to raise the money it needs? Use annual compounding.

10 points

Question 6

Lycan, Inc., has 8.5 percent coupon bonds on the market that have 5 years left to maturity. The bonds make annual payments and have a face value of $1,000. If the YTM on these bonds is 6.1 percent, what is the current bond price?

10 points

Question 7

Emacs Co. issued 18-year, $1,000 face value bonds one year ago at a coupon rate of 7 percent. The bonds make semiannual payments. If the YTM on these bonds is 8.5 percent, what is the current bond price?

10 points

Question 8

Orage Enterprises has bonds on the market making annual payments, with 18 years to maturity, face value of $1,000, and selling for $928.4. At this price, the bonds yield 7.2 percent. What must the coupon rate be on Orages bonds? (Enter rate in percents, not in decimals.)

10 points

Question 9

LibreOffice, Inc. wants to raise $14 million dollars in debt financing. It wants to offer a $1,000 face value, 8.4 percent coupon bond with annual payments and 14 years to maturity. The yield to maturity on similar bonds out in the marketplace is 5.4 percent. How many bonds must the firm issue in order to raise the desired amount of funding?

10 points

Question 10

A $1000 face value bond has two years left to maturity, 5.9% coupon rate with annual coupons, and is currently trading at $926. What is the YTM on this bond?

Enter answer in percents, accurate to 2 decimal places.