# Expert Work

1. A bond with face value $1,000 has a current yield of 6% and a coupon rate of 8%. What is the bond’s price?

2. A 6-year bond pays interest of $80 annually and sells for $950.

What are its coupon rate and yield to maturity?

3. A bond has 8 years until maturity, a coupon rate of 8%, and sells for $1,100.

a. What is the current yield on the bond?

b. What is the yield to maturity?

4. A bond has 8 years until maturity, a coupon rate of 8%, and sells for $1,100.

a. If this bond has a yield to maturity of 8% 1 year from now, what will its price be?

b. What will be the rate of return on the bond?

c. If the inflation rate during the year is 3%, what is the real rate of return on the bond?

5. A General Electric bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%.

a. What interest payments do bondholders receive each year?

b. At what price does the bond sell? (Assume annual interest payments.)

c. What will happen to the bond price if the yield to maturity falls to 6%?

6. A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. What is the bond’s yield to maturity if the bond is selling for

a. $900,00 ?

b. $1.000,00 ?

c. $1.100,00 ?

7. Fill in the table below for the following zero-coupon bonds. The face value of each bond is $1,000.

Price Maturity (years) Yield to Maturity

$300,00 30,00 —

— 10 10%

Face value $1.000,00

8. Perpetual Life Corp. has issued consol bonds with coupon payments of $60. (Consols pay interest forever and never mature. They are perpetuities.) If the required rate of return on these bonds at the time they were issued was 6%, at what price were they sold to the public? If the required return today is 10%, at what price do the consols sell?

2. A 6-year bond pays interest of $80 annually and sells for $950.

What are its coupon rate and yield to maturity?

3. A bond has 8 years until maturity, a coupon rate of 8%, and sells for $1,100.

a. What is the current yield on the bond?

b. What is the yield to maturity?

4. A bond has 8 years until maturity, a coupon rate of 8%, and sells for $1,100.

a. If this bond has a yield to maturity of 8% 1 year from now, what will its price be?

b. What will be the rate of return on the bond?

c. If the inflation rate during the year is 3%, what is the real rate of return on the bond?

5. A General Electric bond carries a coupon rate of 8%, has 9 years until maturity, and sells at a yield to maturity of 7%.

a. What interest payments do bondholders receive each year?

b. At what price does the bond sell? (Assume annual interest payments.)

c. What will happen to the bond price if the yield to maturity falls to 6%?

6. A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. What is the bond’s yield to maturity if the bond is selling for

a. $900,00 ?

b. $1.000,00 ?

c. $1.100,00 ?

7. Fill in the table below for the following zero-coupon bonds. The face value of each bond is $1,000.

Price Maturity (years) Yield to Maturity

$300,00 30,00 —

— 10 10%

Face value $1.000,00

8. Perpetual Life Corp. has issued consol bonds with coupon payments of $60. (Consols pay interest forever and never mature. They are perpetuities.) If the required rate of return on these bonds at the time they were issued was 6%, at what price were they sold to the public? If the required return today is 10%, at what price do the consols sell?

You'll get a 30.5KB .XLS file.