Question 1. GTF Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 10 years left to maturity. The bonds make annual_interest payments. If the market interest rate on these bonds is 7 percent, what is the current bond price?
Question 1. GTF Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 10 years left to maturity. The bonds make annual_interest payments. If the market interest rate on these bonds is 7 percent, what is the current bond price?
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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Transcribed Image Text:**Bond Valuation Exercises:**
**Question 1:**
GTF Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 10 years left to maturity. The bonds make *annual* interest payments. If the market interest rate on these bonds is 7 percent, what is the current bond price?
**Question 2:**
MTV Corporation has 7 percent coupon bonds on the market with a par of $1,000 and 8 years left to maturity. The bonds make *semi-annual* interest payments. If the market interest rate on these bonds is 6 percent, what is the current bond price?
**Question 3:**
Jones Corporation has zero coupon bonds on the market with a par of $1,000 and 8 years left to maturity. If the market interest rate on these bonds is 6 percent, what is the current bond price? (Use the semi-annual interest payment model.)
**Question 4:**
Wilson Corporation has 5 percent coupon bonds on the market with a par of $1,000 and 6 years left to maturity. The bonds make *annual* interest payments. If these bonds currently sell for $800, what is its yield to maturity (YTM)?
**Question 5:**
Linville Corporation issued 15-year, par $1,000 bonds ten years ago at a coupon rate of 5 percent. The bonds make semi-annual payments. If these bonds currently sell for 90 percent of par value, what is its yield to maturity (YTM)?
**Question 6:**
Pecos Company has just issued a 10-year, 10 percent coupon rate, $1,000-par bond that pays interest *semiannually*. *Three years later*, if the going rate of interest on the bond falls to 8 percent, what is the value of the bond?
**Question 7:**
Karen just bought a 10-year, 5% coupon bond with $1,000 par for $825. If she sells this bond *four years later* for $950, what is her realized yield in year 4 (with semi-annual interests)?
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