Questions 1-3 refer to the following bond:

• Today is January 1st, 2017. A bond was just issued with the following promised cash flows:

July 1, 2017: $35

January 1, 2018: $35

July 1, 2018: $35

January 1, 2019: $35

July 1, 2019: $35

January 1, 2020: $1,035

The maturity of the bond is _______ years?

What is the face value (in dollars)?

What is the coupon rate (in percent)? (Round your answer to one decimal place)

If the price of a 6-month zero-coupon bond with face value of $100 is $99.40, what is the Yield to Maturity, expressed as an EAR? (express your answer as a percentage and round to 2 decimal places)

[Use Excel] A coupon bond has 3 years to maturity, a coupon rate of 4%, face value of $1,000 and a current market price of $1,050. The bond pays coupons semi-annually (i.e., every 6 months). What is the bonds Yield to Maturity, expressed as an APR? (express your answer as a percent and round to two decimal places i.e., if you think the answer is 1.583%, enter 1.58)

What is the coupon rate of a coupon bond (that pays coupons semi-annually) if the YTM (expressed as an APR) is 4% and the current price of the bond (per $100 face value) is $100? (express your answer as an APR and round to one decimal place)

Suppose that General Motors issued a bond with 10 years to maturity, a face value of $1,000 and a coupon rate of 10%. For simplicity assume annual coupon payments. The YTM on the bond when issued was 12% (EAR). Assuming interest rates remain constant (i.e. YTM does not change), what is the price of the bond immediately after the first coupon payment? (round your answer to the nearest penny)

Assume the YTM on risk-free zero-coupon bonds of different maturities are as follows:

Continuing the previous problem, what is the Yield to Maturity of this coupon bond? (express your answer as a percent and round to two decimal places)

• Consider the following bonds:

Bond Coupon Rate Maturity

A 0% 10

B 0% 15

C 4% 15

D 8% 10

Which bond's price would change by the most (in percentage terms) in response to a 1% change in interest rates?

Bond A

Bond B

Bond C

Bond D

• Continuing the same problem, which bond's price would change by the least (in percentage terms) in response to a 1% change in interest rates?

Bond A

Bond B

Bond C

Bond D

• Grummon Corp. has issued zero-coupon bonds with 5-year maturity and $100 face value per bond. Investors believe there is a 15% chance that Grummon will default on these bonds. If Grummon does default, investors expect to receive only 45 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, what will be the price of the bonds (per $100 face value)? (round your answer to the nearest penny)
• Continuing the previous problem, what is The YTM of the bonds (i.e., promised return)? (express your answer as a percent and round to one decimal place)