1. Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 15 years to maturity, and a coupon rate of 6.1 percent paid annually.

 

 

 

If the yield to maturity is 7.2 percent, what is the current price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

 

 

Current price

€

 

 

 

2. A Japanese company has a bond outstanding that sells for 95 percent of its ¥100,000 par value. The bond has a coupon rate of 5.40 percent paid annually and matures in 16 years.

 

 

 

What is the yield to maturity of this bond? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

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Yield to maturity

%

 

 

 

3. Page Enterprises has bonds on the market making annual payments, with eleven years to maturity, and selling for $982. At this price, the bonds yield 7.60 percent.

 

 

 

What must the coupon rate be on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Coupon rate

%

 

 

 

4. Ninja Co. issued 11-year bonds a year ago at a coupon rate of 7.7 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.0 percent, what is the current bond price? (Round your answer to 2 decimal places. (e.g., 32.16))

 

Current bond price

$

 

 

 

5. Stone Sour Corp. issued 20-year bonds 2 years ago at a coupon rate of 8.60 percent. The bonds make semiannual payments. If these bonds currently sell for 107 percent of par value, what is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

 

YTM

%

 

 

 

6. Ponzi Corporation has bonds on the market with 18.5 years to maturity, a YTM of 7.90 percent, and a current price of $1,067. The bonds make semiannual payments.

 

 

 

What must the coupon rate be on these bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Coupon rate

%

 

 

 

7. Treasury bills are currently paying 6 percent and the inflation rate is 3.30 percent.

 

 

 

What is the approximate real rate of interest? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Approximate real rate

%

 

 

 

What is the exact real rate? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Exact real rate

     %

 

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8. Suppose the real rate is 3.6 percent and the inflation rate is 5.2 percent.

 

 

 

What rate would you expect to see on a Treasury bill? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Treasury bill rate

%

 

 

 

9. An investment offers a 15 percent total return over the coming year. Fred Bernanke thinks the total real return on this investment will be only 11 percent.

 

 

 

What does Fred believe the inflation rate will be over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

 

 

Inflation rate

%

 

 

 

10. Say you own an asset that had a total return last year of 11.0 percent. If the inflation rate last year was 5.5 percent, what was your real return? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

 

 

Real return

%

 

 

 

11. Martin Software has 10.2 percent coupon bonds on the market with 20 years to maturity. The bonds make semiannual payments and currently sell for 107.9 percent of par.

 

 

 

What is the current yield on the bonds? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

Current yield

%

 

 

 

What is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

 

 

 

YTM

%

 

 

 

What is the effective annual yield? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

 

 

 

Effective annual yield

%

 

 

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12. You purchase a bond with an invoice price of $1,042. The bond has a coupon rate of 6.0 percent, and there are four months to the next semiannual coupon date.

 

 

 

What is the clean price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))