FIN

Question

Problem 9-21

Consider the following spot interest rates for maturities of one, two, three, and four years.

r1 = 4.1% r2 = 4.5% r3 = 5.2% r4 = 6.0%

What are the following forward rates, where f1, k refers to a forward rate for the period beginning in one year and extending for k years? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

f1,1 %

f1,2 %

f1,3 %

16.value:1.50 points

Problem 9-23

Consider the following spot interest rates for maturities of one, two, three, and four years.

r1 = 4.6% r2 = 5.2% r3 = 5.9% r4 = 6.7%

Assuming a constant real interest rate of 2 percent, what are the approximate expected inflation rates for the next four years? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

I1 %

I2 %

I3 %

I4 %

17.

value:1.50 points

Problem 9-24

A Treasury bill that settles on July 17, 2010, pays $100,000 on August 21, 2010. Assuming a discount rate of 5.78 percent, what is the price and bond equivalent yield? Use Excel to answer this question. (Round your Price to 2 decimal places and Yield to 3 decimal places. Omit the “$” & “%” signs in your response.)

Price $

Bond equivalent yield %

18.

value:1.00 points

Problem 9-25

You have a car loan with a nominal rate of 5.68 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

EAR %

19.

value:1.00 points

Problem 10-1

Aloha Inc. has 4.5 percent coupon bonds on the market that have 14 years left to maturity. If the YTM on these bonds is 5.3 percent, what is the current bond price? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Price $

20.

value:2.00 points

Problem 10-2

Rolling Company bonds have a coupon rate of 9.20 percent, 20 years to maturity, and a current price of $1,246. What is the YTM? The current yield? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

YTM %

Current yield %

21.

value:1.00 points

Problem 10-3

A bond has a coupon rate of 10 percent and 12 years until maturity. If the yield to maturity is 8.3 percent, what is the price of the bond? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Price of the bond $

22.

value:1.00 points

Problem 10-4

A bond with 15 years until maturity has a coupon rate of 8.6 percent and a yield to maturity of 9.8 percent. What is the price of the bond? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Price of the bond $

23.

value:2.00 points

Problem 10-5

A bond sells for $904.80 and has a coupon rate of 7.00 percent. If the bond has 14 years until maturity, what is the yield to maturity of the bond? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Yield to maturity %

24.

value:1.00 points

Problem 10-7

May Industries has a bond outstanding that sells for $931. The bond has a coupon rate of 7.80 percent and 14 years until maturity. What is the yield to maturity of the bond? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Yield to maturity %

25.

value:1.00 points

Problem 10-8

Atlantis Fisheries issues zero coupon bonds on the market at a price of $304 per bond. Each bond has a face value of $1,000 payable at maturity in 10 years. What is the yield to maturity for these bonds? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Yield to maturity %

26.

value:2.00 points

Problem 10-9

Atlantis Fisheries issues zero coupon bonds on the market at a price of $400 per bond. Each bond has a face value of $1,000 payable at maturity in 20 years. It is callable in 10 years at a call price of $560. Using semiannual compounding, what is the yield to call for these bonds? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Yield to call %

27.

value:2.00 points

Problem 10-10

Atlantis Fisheries issues zero coupon bonds on the market at a price of $319 per bond. Each bond has a face value of $1,000 payable at maturity in 12 years. It is callable in 6 years at a call price of $460. Using semiannual compounding, what is the yield to call for these bonds? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Yield to call %

28.

value:1.00 points

Problem 10-11

Ghost Rider Corporation has bonds on the market with 11 years to maturity, a YTM of 5.5 percent, and a current price of $953. What must the coupon rate be on the company’s bonds? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Coupon rate %

29.

value:1.00 points

Problem 10-12

Great Wall Pizzeria issued 10-year bonds one year ago at a coupon rate of 7 percent. If the YTM on these bonds is 8.5 percent, what is the current bond price? (Round your answer to 2 decimal places. Omit the “$” sign in your response.)

Price $

30.

value:4.00 points

Problem 10-17

Both bond A and bond B have 8.2 percent coupons and are priced at par value. Bond A has 6 years to maturity, while bond B has 18 years to maturity.

a) Assume if interest rates suddenly rise by 1 percent, what is the percentage change in price of bond A and bond B? (Round your answer to 2 decimal places. Negative answers should be indicated by a minus sign. Omit the “%” sign in your response.)

Bond A %

Bond B %

b) Assume if interest rates suddenly fall by 1 percent instead, what would the percentage change in price of bond A and bond B? (Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Bond A %

Bond B %

31.

value:1.00 points

Problem 10-19

LKD Co. has 10 percent coupon bonds with a YTM of 8.1 percent. The current yield on these bonds is 9.3 percent. How many years do these bonds have left until they mature? (Round your answer to 2 decimal places.)

Bonds mature years

 

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