Practice 4: Bonds

Face value for bonds is $1000 unless specified otherwise. Compounding is annual unless stated otherwise. There is one bonus problem.

1. A deep discount (zero coupon) bond matures in 3 years. If the yield is 10%, find the current price.

2. B&O Railroad bonds have a 9% coupon rate and a $1000 face. The coupons are paid semiannually. The bond has 20 years to maturity and the yield is 7% compound semiannually. Find the price.

3. You buy a bond that matures in 10 years for $86 The coupon rate is 15%; coupons are paid annually. Find the yield to maturity on this bond.

4. A bond has 6 years to maturity, a 10% coupon rate and a $1000 face value. The current price is $976.45. Find the yield to maturity if the coupons are paid semiannually.