Exam 6: Bonds

Use the information for the question(s) below. The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi-annually. -How much will each semi-annual coupon payment be?

The credit spread of a bond shrinks if it is perceived that the probability of the issuer defaulting increases.

How are the cash flows of a coupon bond different from an amortizing loan?

A bond is said to mature on the date when the issuer repays its notional value.

A $5000 bond with a coupon rate of 6.4% paid semi-annually has four years to maturity and a yield to maturity of 6.2%.If interest rates fall and the yield to maturity decreases by 0.8%,what will happen to the price of the bond?

A corporate bond which receives a BBB rating from Standard and Poor's is considered

Use the figure for the question(s) below. -The current zero-coupon yield curve for risk-free bonds is shown above.What is the price per $100 face value of a four-year,zero-coupon,risk-free bond?

A bond,which is currently trading at $3440,has four years to maturity,a $4000 face value,and a 3.5% coupon rate with annual coupons.Which of the following is its approximate yield to maturity?

A Government of Canada zero-coupon bond has a yield to maturity of 4%. Investors believe that AB Company will default with certainty at the end of 1 year,only being able to pay 85% of its obligations.The company's bond promises $5,000 next year.What is the price of a one-year zero-coupon bond issued by AB Company?

A corporation issues a bond that generates the above cash flows.If the periods shown are 3 months,which of the following best describes that bond?

What is the yield to maturity of a five-year,$5000 bond with a 4.5% coupon rate and semi-annual coupons if this bond is currently trading for a price of $4876?

Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Assuming that Luther's bonds receive a AA rating,the price of the bonds will be closest to:

A company releases a five-year bond with a face value of $1000 and coupons paid semi-annually.If market interest rates imply a YTM of 6%,which of the following coupon rates will cause the bond to be issued at a premium?

A mining company needs to raise $100 million in order to begin open pit mining of a coal seam.The company will fund this by issuing 30-year bonds with a face value of $1000 and a coupon rating of 6%,paid annually.The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings.If the mining company's bonds receive a A rating,what will be their selling price?

Use the information for the question(s) below. The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi-annually. -What care,if any,should be taken regarding the timing of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

What is the yield to maturity of the zero-coupon bond in the above table?

If the yield to maturity of all of the following bonds is 6%,which trades at the greatest discount per $100 face value?

Use the table for the question(s) below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): -Based upon the information provided in the table above,you can conclude

A bond will trade at a discount if its coupon rate is less than its yield to maturity.

Use the information for the question(s) below. -The above table shows the yields to maturity on a number of one-year,zero-coupon securities.What is the price per $100 of the face value of a one-year,zero-coupon corporate bond with a BBB rating?