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b. Suppose a 5-year, 1,000 face value bond with a quoted price of 91.25 has a yield to maturity of 5%. What is the bond's coupon rate? (Hint: The easiest way to solve this question is with the Excel annuity spreadsheet. You can also find the coupon directly and do not need to use the Excel solver. Note that the bond makes semiannual coupon payments.)

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Sixta Kovacek
Sixta KovacekLv2
28 Sep 2019

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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?

A 5 year bond pays interest. The par value is $1000, and the coupon rate equals 7%. If the markets required return on the bond is 8%, then what is the bond's market price?

A bond that matures in two years makes semiannual interest payments. The par value is $1000, the coupon rate equals 4%, and the bond's market price is $1019.27. What is the bond's yield to maturity?

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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