Rottweiler Corporation issued 100, $1,000 par value bonds on February 24, 2019. The original bonds' maturity was 20 years, and they have a six percent coupon. Rottweiler used the money to purchase 150 Really Adorable Puppies™. The firm hopes to double production of Really Adorable Puppies™ in the next five to ten years. The company makes all payments on a semiannual basis.

1. What is the bond's value on February 24, 2020, if the interest rate on comparable debt is 6 percent? What is the current yield? What is the yield to maturity?

2. What is the bond's value on February 24, 2020, if the interest on comparable debt is 10 percent? What is the current yield? What is the yield to maturity?

3. What is the bond's value on February 24, 2020, if the interest on comparable debt is 4 percent? What is the current yield? What is the yield to maturity?

4. Draw the time path of value graph (be sure to label all points of interest) of a 6 percent coupon, $1,000 par value bond when interest rates are 4 percent, 6 percent, and 10 percent.

5. Assume you purchased this bond on February 24, 2020, for the amount calculated in problem 3. You hold the bond for one year and then resell it to another investor on February 24, 2021. Assuming there are no additional changes in interest rates, prove numerically (using interest and capital yields) that you received a 4 percent rate of return on your bond investment.

6. The 7 percent semiannual coupon bonds of Zizzle, Inc. are selling for $1,021. The bonds have a face value of $1,000 and mature in eight years. What is the current yield? What is the yield to maturity?

7. You purchased a fifteen-year, 12 percent semiannual coupon bond for $1,265.47. What is your current yield? What is your yield to maturity?

Answer rating: 100% (QA)

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