11. Bond Pricing. A General Motors bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. a. What interest payments do bondholders receive each year? (LOI) b. At what price does the bond sell? (Assume annual interest payments.) (LO2) c. What will happen to the bond price if the yield to maturity falls to 6%? (LO2)
11. Bond Pricing. A General Motors bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%. a. What interest payments do bondholders receive each year? (LOI) b. At what price does the bond sell? (Assume annual interest payments.) (LO2) c. What will happen to the bond price if the yield to maturity falls to 6%? (LO2)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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11. Bond Pricing. A General Motors bond carries a coupon rate of 8%, has 9 years until maturity,
and sells at a yield to maturity of 7%.
a. What interest payments do bondholders receive each year? (LOI)
b. At what price does the bond sell? (Assume annual interest payments.) (LO2)
c. What will happen to the bond price if the yield to maturity falls to 6%? (LO2)
12. Bond Pricing. A 30-year maturity bond with face value of $1,000 makes annual coupon pay-
ments and has a coupon rate of 8%. What is the bond's yield to maturity if the bond is selling for
a. $900? (LO2)
b. $1,000? (LO2)
c. $1,100? (LO2)
13. Bond Pricing. Repeat the previous problem assuming semiannual coupon payments. (LO2)
14. Bond Pricing. Fill in the table below for the following zero-coupon bonds. The face value of
each bond is $1,000. (LO2)
Price
Maturity (years) Yield to Maturity
$300
30
300
8%
10
10
15. Consol Bonds. Perpetual Life Corp. has issued consol bonds with coupon payments of $60.
(Consols pay interest forever and never mature. They are perpetuities.) If the required rate of
return on these bonds at the time they were issued was 6%, at what price were they sold to the
public? If the required return today is 10%, at what price do the consols sell? (LO2)
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