(a) To Discuss: On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table: Description Coupon Price Callable Call price Sentinel due May 30 2028 4% 100 Non-callable NA Colina due May 30 2028 4.20% 100 Currently callable 102 If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond. Introduction: A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond. Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond. Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

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Answer 1

Question

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

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Answer 2

Question

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

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Answer 3

Question

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

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Answer 4

Question

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

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Answer 5

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Answer 6

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Answer 7

Chapter 10, Problem 2CP

Summary Introduction

(a)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

If the market interest rates decline by 100 basis points (i.e. 1%), contrast the effect of this decline on the price of each bond.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Answer 8

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Answer 9

Summary Introduction

(b)

To Discuss:

On May 30, 2018, Janice Kerr is considering the newly issued 10-year AAA corporate bonds shown in the following table:

Description Coupon Price Callable Call price

Sentinel due May 30 2028 4% 100 Non-callable NA

Colina due May 30 2028 4.20% 100 Currently callable 102

To discuss whether Kerr should prefer the Colina over the Sentinal bond when rates are expected to rise or to fall.

Introduction:

A bond is a security that creates an obligation on the issuer to make specified payments to the holder for a given period of time. The face value of the bond is the amount the holder will receive on maturity along with the coupon rate which is also known as the interest rate of the bond.

Yield to maturity is defined as the discount rate that makes the present payments from the bond equal to its price. In simple terms, it is the average rate of return a holder can expect from that bond.

Callable bonds are those bonds which are repurchased by the issuer at a specified call price before the maturity of the bond.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 10 - Prob. 1PS Ch. 10 - Prob. 2PS Ch. 10 - Prob. 3PS Ch. 10 - Prob. 4PS Ch. 10 - Prob. 5PS Ch. 10 - Prob. 6PS Ch. 10 - Prob. 7PS Ch. 10 - Prob. 8PS Ch. 10 - Prob. 9PS Ch. 10 - Prob. 10PS

Description	Coupon	Price	Callable	Call price
Sentinel due May 30 2028	4%	100	Non-callable	NA
Colina due May 30 2028	4.20%	100	Currently callable	102

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Chapter 10 Solutions