Question: CFIN5 - CHAPTER 6 PROBLEMS P6-2 The Pennington Corporation issued a new series of bonds 23 years ago. The bonds were sold at par value,

CFIN5 - CHAPTER 6 PROBLEMS

P6-2 The Pennington Corporation issued a new series of bonds 23 years ago. The bonds were sold at par value, which is $1,000, have a 12 percent coupon, and mature 6 years from today. Coupon payments are made semiannually (on June 30 and December 31).

What was the YTM on Penningtons bonds when they were issued?

Suppose that the bonds currently sell for $916.42. What is the bonds YTM?

P6-6 A corporation has an outstanding bond with the following characteristics:

Coupon interest rate 6.0%

Interest payments semiannually

Face value $1,000.00

Years to maturity 8

Current market value $ 902.81

What is the yield to maturity (YTM) for this bond?

P6-8 Suppose that five years ago Cisco Systems sold a 15-year bond issue that had a $1,000 par value and a 7 percent coupon rate. Interest is paid semiannually.

If the going interest rate has risen to 10 percent, at what price would the bonds be selling today?

Suppose that the interest rate remained at 10 percent for the next 10 years. What would happen to the price of the Cisco Systems bonds over time?

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