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2 Sep 2018

Yield to maturity

Heymann Company bonds have 5 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 10%.

A. What is the yield to maturity at a current market price of

a. $863? Round your answer to two decimal places. %

b. $1,197? Round your answer to two decimal places.%

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Nelly Stracke
Nelly StrackeLv2
2 Sep 2018

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Jackson Corporation's bonds have 25 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Round your answer to the nearest cent.

Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

he real risk-free rate of interest is 2%. Inflation is expected to be 3% this year and 6% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Round your answer to two decimal places.
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A Treasury bond that matures in 10 years has a yield of 3%. 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.

Jackson Corporation's bonds have 25 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. The bonds have a yield to maturity of 10%. What is the current market price of these bonds? Round your answer to the nearest cent.

Wilson Wonders's bonds have 12 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $850. What is their yield to maturity? Round your answer to two decimal places.

he real risk-free rate of interest is 2%. Inflation is expected to be 3% this year and 6% during the next 2 years. Assume that the maturity risk premium is zero.

What is the yield on 2-year Treasury securities? Round your answer to two decimal places.
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What is the yield on 3-year Treasury securities? Round your answer to two decimal places.
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A Treasury bond that matures in 10 years has a yield of 3%. 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.

Heymann Company bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 9%.

What is the yield to maturity at a current market price of

$834? Round your answer to two decimal places.
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$1,081? Round your answer to two decimal places.
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Would you pay $834 for each bond if you thought that a "fair" market interest rate for such bonds was 14%-that is, if rd = 14%?

A) You would not buy the bond as long as the yield to maturity at this price is less than the coupon rate on the bond.

B) You would buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

C) You would buy the bond as long as the yield to maturity at this price is less than your required rate of return.

D) You would buy the bond as long as the yield to maturity at this price equals your required rate of return.

E) You would not buy the bond as long as the yield to maturity at this price is greater than your required rate of return.

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