Jackson Corporation's bonds have 12 years remaining to maturity. Interest is paid annually

BA350 Week 6 Problem 5.1 ,5.4, 5.9, 5.13 Solution

(100% Correct Solution With Calculation)

5-1 Bond valuation with annual payments

Jackson Corporation'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 in 8%. The bonds have a yield to maturity of 9%. What is the current market price of these bonds?

5.4 determinant of interest rates

The real risk-free rate of interest is 4%. Inflation is expected to be 2% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero. What is the yield on 2-year Treasury securities? What is the yield on 3 year Treasury securities?

5.9 bond valuation and interest rare risk T

he Garraty Company has two bond issues outstanding. Both bonds pay \$100 annual interest plus \$1,000 at maturity. Bond L has a maturity of 15 years, and Bond S has a maturity of 1 year. - What will be the value of each of these bonds when the going rate of interest is (1) 5%, (2) 8%, and (3) 12%? Assume that there is only one more interest payment to be made on bond S. - Why does the longer-term (15 year) bond fluctuate more when interest rates change than does the short term bond (1 year)?

5.13 yield to maturity and current yield

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?

BA350 Problem 5.1 ,5.4, 5.9, 5.13