# What is the yield to maturity for a seven-year bond that pays

June 1, 2016

Question
1. What is the yield to maturity for a seven-year bond that pays 11% interest on a \$1000 face value semi-annually if the bond sells for \$952?

2. The Nickelodeon Manufacturing Co. has a series of \$1000 par value bonds outstanding. Each bond pays interest semi-annually and carries an annual coupon rate of 7%. Some bonds are due in three years while others are due in
10 years. If the required rate of return on bonds is 10%, what is the current price of:
a) the bonds with 3 years to maturity?
b) the bonds with 10 years to maturity?

3. A bond with a coupon rate of 7.30% has a price that today equals \$868.92. The \$1,000 face value bond pays coupon every 6 months, 30 coupons remain, and a coupon was paid yesterday. Suppose you buy this bond at today’s price and hold it so that you receive 20 coupons. You sell the bond upon receiving that last coupon. Find the selling price if the bond’s YTM remains constant.