Qu. 1 Differentiate between Treasury bonds and Treasury indexed bonds.

Qu. 2 Who issues semis and what is the purpose of the funds raised?

Qu. 3 Define yield to maturity. Why is it important?

Qu. 4 Explain why bond prices and interest rates are negatively related. What is the role of the coupon rate and term-to-maturity in this relationship?

Qu. 5 What economic conditions would prompt investors to take advantage of a bond's convertibility feature?

Qu. 6 Bond price: Alex Simmonds just received a gift from her grandfather. She plans to invest in a 5-year bond issued by Nucorp Pty Ltd that pays annual coupons of 4.81 per cent. If the current market rate is 9.11 per cent, what is the maximum amount Alex should be willing to pay for this bond? Assume it has a face value of $1000.

Qu. 7 Bond price: Choice Pty Ltd has issued a 3-year bond with a face value of $1000 that pays a coupon of 4.90 per cent. Coupon payments are made semi-annually. Given the market rate of interest of 4.70 per cent, what is the market value of the bond?

Qu. 8 Bond price: You are interested in investing in a 5-year bond with a face value of $1000 that pays a 6.33 per cent coupon with interest to be received semi-annually. Your required rate of return is 9.69 per cent. What is the most you would be willing to pay for this bond?

Qu. 9 Zero coupon bonds: Chelsea Carter is interested in buying a 5-year zero coupon bond whose face value is $1,000. She understands that the market interest rate for similar investments is 7.96 per cent. Assume annual compounding for payments. What is the current price of this bond?

Qu. 10 Zero coupon bonds: 10-year zero coupon bonds issued by the Queensland Treasury have a face value of $1000 and interest is compounded semi-annually. If similar bonds in the market yield 11.32 per cent, what is the value of these bonds? Qu. 11 Yield to maturity: Jessica Thompson is looking to invest in a 3-year bond with a face value of $1000 that pays semi-annual coupons at a coupon rate of 10.35 per cent. If these bonds have a market price of $957.02, what yield to maturity and effective annual yield can she expect to earn?

Qu. 12 Realised yield: Four years ago, Lisa Hampson bought 6-year, 11.63 per cent coupon bonds issued by Flight Centre Ltd for $947.68. If she sells these bonds at the current price of $903.47, what is the realised yield on the bonds? Assume annual coupons on similar coupon-paying bonds and a face value of $1000.

Answer rating: 100% (QA)

Treasury bonds also known as Tbonds are longterm debt securities issued by the US Department of the Treasury to finance government spending They have a maturity period ranging from 10 to 30 years Trea... View the full answer