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2. Bonds


a. Suppose a 10-year, 1,000 face value bond with a 6% coupon rate and semiannual coupons is trading for a quoted price of 107.79.
(i) What is the bond's yield to maturity (expressed as an APR with semiannual compounding)? (ii) If the bond's yield to maturity changes to 4% APR, what will the bond's price be?

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Tod Thiel
Tod ThielLv2
28 Sep 2019

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A 10 year, 12% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,060. The bond sells for $1,100. (Assume that the bond has just been issued.)

a. What is the bond's yield to maturity?
b. What is the bond's current yield?
c. What is the bond's capital gain or loss yield?
d. What is the bond's yield to call?

A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT? Please explain how also.

Select one:

a. The bond's coupon rate exceeds its current yield.

b. The bond's current yield exceeds its yield to maturity.

c. The bond's yield to maturity is greater than its coupon rate. 

d. The bond's current yield is equal to its coupon rate.

e. If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850.

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