Finance Week Six 21 Problems Assignment Solution

| September 28, 2018

1. Tealers Wheel Software has 8.53% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 114.24% of par. What is the current yield?Note: Enter your answer rounded off to two decimal points.2. ABC’s Inc.’s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.3. ABC has issued a bond with the following characteristics:Par: $1,000; Time to maturity: 12 years; Coupon rate: 11%;Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 9.7%Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.4. ABC wants to issue 13-year, zero coupon bonds that yield 11.43 percent. What price should they charge for these bonds if they have a par value of $1,000? That is, solve for PV. Assume annual compounding.Hint: zero coupon bonds means PMT = 0Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.5. A bond which sells for less than the face value is called a:perpetuity.par value bond.premium bond.debenture.discount bond.6. ABC has issued a bond with the following characteristics:Par: $1,000; Time to maturity: 12 years; Coupon rate: 9%;Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 7.11%Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box.7. ABC Inc., has $1,000 face value bonds outstanding. These bonds mature in 3 years, and have a 6.5 percent coupon. The current price is quoted at 98.59 percent of par value. Assume semi-annual payments. What is the yield to maturity?Note: Enter your answer rounded off to two decimal points.8. ABC Corp. issued 15-year bonds 2 years ago at a coupon rate of 10.6%. The bonds make semi-annual payments. If these bonds currently sell for 97% of par value, what is the YTM?Note: Enter your answer rounded off to two decimal points.9. ABC’s bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 8 years. What is the yield to maturity?10. The 7.37 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $1,044.9. What is the current yield?Note: Enter your answer rounded off to two decimal points.11. A premium bond is a bond that:has a face value in excess of $1,000.has a par value which exceeds the face value.is callable within 12 months or less.has a market price which exceeds the face value.is selling for less than par value.12. The 10.57 percent coupon bonds of the Peterson Co. are selling for $884.85. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent.Enter your answer in percentages rounded off to two decimal points.13. The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _____ percent.14. Assume that you wish to purchase a 12-year bond that has a maturity value of $1,000 and a coupon interest rate of 11%, paid semiannually. If you require a 7.6% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.Note: Enter your answer rounded off to two decimal points.15. You paid $919 for a corporate bond that has a 11.57% coupon rate. What is the current yield?Hint: if nothing is mentioned, then assume par value = $1,000Note: Enter your answer rounded off to two decimal points.16. ABC has issued a bond with the following characteristics:Par: $1,000; Time to maturity: 9 years; Coupon rate: 5%;Assume annual coupon payments. Calculate the price of this bond if the YTM is 10.74%Note: Enter your answer rounded off to two decimal points.17. You have observed the following returns on ABC’s stocks over the last five years:4.3%, 9.7%, -8.3%, 10.4%, -2.5%What is the geometric average returns on the stock over this five-year period.Note: Enter your answer in percentages rounded off to two decimal points.18. You have observed the following returns on ABC’s stocks over the last five years:4.1%, 8.3%, 5.8%, 11%, 3.6%What is the geometric average returns on the stock over this five-year period.Note: Enter your answer in percentages rounded off to two decimal points.19. You have observed the following returns on ABC’s stocks over the last five years:4.2%, 8.9%, -11.7%, 13.3%, -9%What is the arithmetic average returns on the stock over this five-year period.Note: Enter your answer in percentages rounded off to two decimal points20. You have observed the following returns on ABC’s stocks over the last five years:3.7%, 9.8%, 13.2%, 11.4%, 7.7%What is the arithmetic average returns on the stock over this five-year period.Note: Enter your answer in percentages rounded off to two decimal points.21. Suppose the returns for Stock A for last six years was 4%, 7%, 8%, -2%, 9%, and 7%. Compute the standard deviation of the returns.

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