1. ABC has $1,000 face value bonds outstanding. These bonds pay interest semi-annually, mature in 10 years,...

Question:

1. ABC has $1,000 face value bonds outstanding. These bonds pay interest semi-annually, mature in 10 years, and have a 7.5 percent coupon. The current price is quoted at 99.59 percent of par value. What is the yield to maturity? What is the current yield?

2. Refer to #1 above. Suppose the bonds are callable in 5 years at 105 percent of par value, what is the yield-to-call?

3. ABC's bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 12 years. What is the yield to maturity? What is the current yield?

4. Refer to #1 above. Suppose the bonds are callable in 5 years at 110 percent of par value, what is the yield-to-call?

5. When is a company likely to make a call - when the interest rates go up or go down? why?

6. What is a sinking fund provision?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...