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Chapter 7 Assignment: Comprehensive Problem Refer To The Problem Below and Answer The Following Questions

This document provides information about 4 bonds - Bonds A, B, C, and D. For each bond, it identifies whether it is trading at a premium, discount, or par. It then calculates the price and current yield of each bond. Finally, it calculates the potential price of each bond in 1 year if yields remain at 9% and identifies the nominal yield to maturity of Bond D.

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Hella Mae Rambunay
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152 views4 pages

Chapter 7 Assignment: Comprehensive Problem Refer To The Problem Below and Answer The Following Questions

This document provides information about 4 bonds - Bonds A, B, C, and D. For each bond, it identifies whether it is trading at a premium, discount, or par. It then calculates the price and current yield of each bond. Finally, it calculates the potential price of each bond in 1 year if yields remain at 9% and identifies the nominal yield to maturity of Bond D.

Uploaded by

Hella Mae Rambunay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 7 Assignment

COMPREHENSIVE PROBLEM

Refer to the problem below and answer the following questions.

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

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. What is the bond's nominal yield to maturity? (Your answer
should be in percentage and round your answers to two decimal places. i.e.,
12.34%) *
5.83%

5.83%

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. What is the bond's nominal yield to maturity? (Your answer
should be in percentage and round your answers to two decimal places. i.e.,
12.34%) *
5.26%

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

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