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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
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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**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)?
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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