Chapter 7 Assignment: Comprehensive Problem Refer To The Problem Below and Answer The Following Questions
Chapter 7 Assignment: Comprehensive Problem Refer To The Problem Below and Answer The Following Questions
COMPREHENSIVE PROBLEM
a. Before calculating the prices of the bonds, indicate whether each bond is trading at
a premium, at a discount, or at par. *
6 points
Trading at a premium
Trading at a discount
Trading at par
Bond A Trading at a discount
Bond B Trading at par
Bond C Trading at a premium
b. The price of Bond A is? (Round your answers to two decimal places. Format of your
answer should be: $1,123.45) *
$856.79
$856.79
b. The price of Bond B is? (Round your answers to two decimal places. Format of your
answer should be: $1,123.45) *
$1,000.00
$1,000.00
b. The price of Bond C is? (Round your answers to two decimal places. Format of your
answer should be: $1,123.45) *
$1,143.21
$1,143.21
c. Calculate the current yield for Bond A (Hint: Refer to Footnote 7 for the definition of
the current yield and to Table 7.1. Your answer should be in percentage and round
your answers to two decimal places. i.e., 12.34%) *
8.17%
8.17%
c. Calculate the current yield for Bond B (Hint: Refer to Footnote 7 for the definition of
the current yield and to Table 7.1. Your answer should be in percentage and round
your answers to two decimal places. i.e., 12.34%) *
9.00%
9.00%
c. Calculate the current yield for Bond C (Hint: Refer to Footnote 7 for the definition of
the current yield and to Table 7.1. Your answer should be in percentage and round
your answers to two decimal places. i.e., 12.34%) *
9.62%
9.62%
d. If the yield to maturity for each bond remains at 9%, what will be the price of Bond A
1 year from now? (Round your answers to two decimal places. Format of your answer
should be: $1,123.45) *
$863.90
$863.90
d. If the yield to maturity for each bond remains at 9%, what will be the price of Bond B
1 year from now? (Round your answers to two decimal places. Format of your answer
should be: $1,123.45) *
$1,000.00
$1,000.00
d. If the yield to maturity for each bond remains at 9%, what will be the price of Bond C
1 year from now? (Round your answers to two decimal places. Format of your answer
should be: $1,123.45) *
$1,136.10
$1,136.10
5.83%
5.26%
e. Mr. Clark is considering another bond, Bond D. It has an 8% semiannual coupon
and a $1,000 face value (i.e., it pays a $40 coupon every 6 months). Bond D is
scheduled to mature in 9 years and has a price of $1,150. It is also callable in 5 years
at a call price of $1,040. If Mr. Clark were to purchase this bond, would he be more
likely to receive the yield to maturity or yield to call? *
YIELD TO MATURITY