Stock and Percent
How to Value Bonds
1. What is the present value of a 10-year, pure discount bond paying $1,000 at maturity if the appropriate interest rate is:
a. 5 percent? b. 10 percent? c. 15 percent?
2. Microhard has issued a bond with the following characteristics:
Principal: $1,000 Time to maturity: 20 years Coupon rate: 8 percent, compounded semiannually Semiannual payments
Calculate the price of this bond if the stated annual interest rate, compounded semiannually, is:
a. 8% b. 10% c. 6%
3. Consider a bond with a face value of $1,000. The coupon payment is made semiannually and the yield on the bond is 12% (effective annual yield). How much would you pay for the bond if
a. the coupon rate is eight percent and the remaining time to maturity is 20 years? b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?
4. Jay’s Trucking, Inc. has issued an eight percent, 20-year bond paying interest semiannually. The bond has a face value of $1,000. If the yield on the bond is 10 percent (effective annual yield), what is the price of the bond?
5. A bond is sold at $923.14 (below its par value of $1,000). The bond matures in 15 years and has a 10-percent yield, expressed as a stated annual interest rate, compounded semiannually. What is the coupon rate on the bond if the coupon is paid semiannually? The next payment occurs six months from today.
6. You have just purchased a newly-issued $1,000 five-year Vanguard Company bond at par. This five-year bond pays $60 in interest semiannually. You are also considering the purchase of another Vanguard Company bond that pays $30 in semiannual interest payments and has six years remaining before maturity. This bond has a face value of $1,000.
a. What is the yield on the five-year bond (expressed as an effective annual yield)? b. Assume that
1. What is the present value of a 10-year, pure discount bond paying $1,000 at maturity if the appropriate interest rate is:
a. 5 percent? b. 10 percent? c. 15 percent?
2. Microhard has issued a bond with the following characteristics:
Principal: $1,000 Time to maturity: 20 years Coupon rate: 8 percent, compounded semiannually Semiannual payments
Calculate the price of this bond if the stated annual interest rate, compounded semiannually, is:
a. 8% b. 10% c. 6%
3. Consider a bond with a face value of $1,000. The coupon payment is made semiannually and the yield on the bond is 12% (effective annual yield). How much would you pay for the bond if
a. the coupon rate is eight percent and the remaining time to maturity is 20 years? b. the coupon rate is 10 percent and the remaining time to maturity is 15 years?
4. Jay’s Trucking, Inc. has issued an eight percent, 20-year bond paying interest semiannually. The bond has a face value of $1,000. If the yield on the bond is 10 percent (effective annual yield), what is the price of the bond?
5. A bond is sold at $923.14 (below its par value of $1,000). The bond matures in 15 years and has a 10-percent yield, expressed as a stated annual interest rate, compounded semiannually. What is the coupon rate on the bond if the coupon is paid semiannually? The next payment occurs six months from today.
6. You have just purchased a newly-issued $1,000 five-year Vanguard Company bond at par. This five-year bond pays $60 in interest semiannually. You are also considering the purchase of another Vanguard Company bond that pays $30 in semiannual interest payments and has six years remaining before maturity. This bond has a face value of $1,000.
a. What is the yield on the five-year bond (expressed as an effective annual yield)? b. Assume that