Individual Homework $-$ Chapter $7$

$($Due Date: March $17,2025)$

Note: please show detailed steps toward your final answers.

Grohl Co$.$ issued $15-$year bonds $5$ years ago at a coupon rate of $6\%.$ The bonds make semiannual payments, and the par value of the bond is $$1,000.$ If the YTM on these bonds is $7\mathrm{.}2\%,$ what is the current bond price?

Ngata Corp. issued $15-$year bonds $3$ years ago at a coupon rate of $7\mathrm{.}4\%.$ The bonds make semiannual payments, and the par value is $$1,000.$ If these bonds currently sell for $102\%$ of the par value, what is the YTM$?$ The effective annual yield? The current yield?

Bond J and Bond K are $12\%$ coupon bonds, and both make semiannual payments. Bond J has $20$ years to maturity, and Bond K has $2$ years to maturity. Both bonds have a YTM of $10\%.$ If interest rates suddenly rise by $2\%,$ what is the percentage price change of these bonds? What if rates suddenly fall by $2\%$ instead? What does this problem tell you about the interest rate risk of long$-$term bonds?

Bond A is a $4\%$ coupon bond. Bond B is a $12\%$ coupon bond. Both bonds have $10$ years to maturity, make semiannual payments, and have a YTM of $7\%.$ If interest rates suddenly rise by $2\%,$ what is the percentage price change of these bonds? What if rates suddenly fall by $2\%$ instead? What does this problem tell you about the interest rate risk of lower coupon bonds?

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