Current Yield for Annual Payments

1. Heath Foods’s bonds have 11 years remaining to maturity. The bonds have a face value of $1,000 and a yield to maturity of 8%. They pay interest annually and have a 7% coupon rate. What is their current yield? Round your answer to two decimal places.

2. Default Risk Premium

A Treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 10%. Assume that the liquidity premium on the corporate bond is 0.7%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.

3. Yield to Call and Realized Rates of Return

Six years ago, Goodwynn & Wolf Incorporated sold a 17-year bond issue with a 12% annual coupon rate and a 7% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price. Round your answer to two decimal places.

4. Bond Yields and Rates of Return A 15-year, 14% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,075. The bond sells for $1,050. (Assume that the bond has just been issued.)

What is the bond’s yield to maturity? Round your answer to two decimal places.

%

What is the bond’s current yield? Round your answer to two decimal places.

%

What is the bond’s capital gain or loss yield? Loss should be indicated with minus sign. Round your answer to two decimal places.

%

What is the bond’s yield to call? Round your answer to two decimal places.

%

5. You just purchased a bond that matures in 5 years. The bond has a face value of $1,000 and has an 8% annual coupon. The bond has a current yield of 8.21%. What is the bond’s yield to maturity? Round your answer to two decimal places.

6. Current Yield with Semiannual Payments

A bond that matures in 7 years sells for $1,020. The bond has a face value of $1,000 and a yield to maturity of 10.5883%. The bond pays coupons semiannually. What is the bond’s current yield? Round your answer to two decimal places.

7. Yield to Call, Yield to Maturity, and Market Rates

Absalom Motors’s 14% coupon rate, semiannual payment, $1,000 par value bonds that mature in 15 years are callable 5 years from now at a price of $1,050. The bonds sell at a price of $1,353.54, and the yield curve is flat. Assuming that interest rates in the economy are expected to remain at their current level, what is the best estimate of the nominal interest rate on new bonds? Round your answer to two decimal places.

8. Determinants of Interest Rates

The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 4% thereafter. The maturity risk premium is estimated to be 0.0003 x (t – 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Round your answer to two decimal places.

The price is based on these factors:

Academic level

Number of pages

Urgency

Basic features

- Free title page and bibliography
- Unlimited revisions
- Plagiarism-free guarantee
- Money-back guarantee
- 24/7 support

On-demand options

- Writer’s samples
- Part-by-part delivery
- Overnight delivery
- Copies of used sources
- Expert Proofreading

Paper format

- 275 words per page
- 12 pt Arial/Times New Roman
- Double line spacing
- Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Delivering a high-quality product at a reasonable price is not enough anymore.

That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
## Recent Comments