FIN HW 2

Coupon rate [removed] %
  Yield to maturity [removed] %

A 5-year Circular File bond pays interest of $50 annually and sells for $976. If Circular File wants to issue a new 5-year bond at face value, what coupon rate must the bond offer? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Coupon rate [removed] %
A bond has 8 years until maturity, a coupon rate of 5%, and sells for $1,065.

 

a. What is the current yield on the bond? (Round your answer to 2 decimal places.)

 

  Current yield [removed] %

 

b. What is the yield to maturity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Yield to maturity [removed] %

 

General Matter’s outstanding bond issue has a coupon rate of 8.6%, and it sells at a yield to maturity of 7.75%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value? (Round your answer to 2 decimal places.)

 

  Coupon rate [removed] %
Refer the table below:

 

Maturity Coupon Bid Price Asked Price Asked Yield, %
2012 May 15 1.375 101:05 101:06 0.78
2013 May 15 3.625 106:31 107:01 1.23
2014 May 15 4.75 111:22 111:23 1.70
2020 May 15 8.75 144:17 144:19 3.44
2025 Aug 15 6.875 133:07 133:11 3.94
2030 May 15 6.25 128:25 128:27 4.12
2040 May 15 4.375 100:28 100:29 4.32

 

What is the current yield of the 4.75% 2014 maturity bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

  Current yield [removed] %

One bond has a coupon rate of 5.4%, another a coupon rate of 8.2%. Both bonds have 13-year maturities and sell at a yield to maturity of 7.5%.

 

a. If their yields to maturity next year are still 7.5%, what is the rate of return on each bond? (Do not round intermediate calculations. Round your answers to 1 decimal place.)

 

Rate of Return
  Bond 1 [removed] %
  Bond 2 [removed] %

 

b. Does the higher coupon bond give a higher rate of return?
[removed] Yes
[removed] No

Fill in the table below for the following zero-coupon bonds. The face value of each bond is $1,000. (Do not round intermediate calculations. Round “Yield to maturity” to 3 decimal places and rest of the answers to 2 decimal places.)

 

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