QUESTION 11

PART A

PART B

PART C

PART D

(Related to Checkpoint 9.2) (Yield to maturity) The market price is $1,075 for a 14-year bond ($1,000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity? - The bond's yield to maturity is %. (Round to two decimal places.) (Related to Checkpoint 9.3) (Bond valuation) Doisneau 18-year bonds have an annual coupon interest of 13 percent, make interest payments on a semiannual basis, and have a $1,000 par value. If the bonds are trading with a market's required yield to maturity of 15 percent, are these premium or discount bonds? Explain your answer. What is the price of the bonds? a. If the bonds are trading with a yield to maturity of 15%, then (Select the best choice below.) O A. the bonds should be selling at a discount because the bond's coupon rate is less than the yield to maturity of similar bonds. B. there is not enough information to judge the value of the bonds. OC. the bonds should be selling at a premium because the bond's coupon rate is greater than the yield to maturity of similar bonds. OD. the bonds should be selling at par because the bond's coupon rate is equal to the yield to maturity of similar bonds. (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation) Fingen's 19-year, $1,000 par value bonds pay 9 percent interest annually. The market price of the bonds is $860 and the market's required yield to maturity on a comparable-risk bond is 12 percent. a. Compute the bond's yield to maturity b. Determine the value of the bond to you, given your required rate of return. C. Should you purchase the bond? a. What is your yield to maturity on the Fingen bonds given the market price of the bonds? % (Round to two decimal places.) (Related to Checkpoint 9.2) (Yield to maturity) Abner Corporation's bonds mature in 24 years and pay 7 percent interest annually. If you purchase the bonds for 5950, what is your yield to maturity? C. Your yield to maturity on the Abner bonds is%. (Round to two decimal places.)