The last few questions will deal with Bond pricing and taxable vs. non-taxable bonds. Please use the calulator to answer the questions.

Portside Inc.'s bonds mature in 9 years, have a par value of $1,000, and have an annual coupon rate of 7.5%.

The market interest rate for the bonds is 9%. What is the price of the bond?

AnswerA 27-year, $1,000 par value bond has an 7.5% annual coupon. The bond currently sells for $752.

If the yield to maturity remains at its current rate, what will the price of the bond be 6 years from now?

Answer i/y =Answer Price in 6 years

Currently, Texana Inc.'s bonds sell for $1,350. They pay an annual coupon rate of 11%, have a 15-year maturity, and a $1,000 par value,

but they can be called in 5 years at $1,075. Assume that no costs other than the call premium would be incurred to call and refund

the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future.

What is the difference between this bond's YTM and its YTC?

Answer YTMAnswer YTCDifferencein the previous question, if interest rates in 6 years were at 5%, would the bonds be called; yes or no

Answer

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