Question

Q1: Grohl Co. issued 11-year bonds a year ago at a coupon rate of 6.5 percent. The bonds make semiannual payments. If the YTM on these bonds is 8.2 percent, what is the current bond price? Q2 Ashes Divide Corporation has bonds on the market with 15 years to maturity, a YTM of 7.2 percent and a current price of $856. The bonds make semiannual payments. What must the coupon rate be on these bonds? Q3: Both Bond Sam and Bond Dave have 10 percent coupons, make semiannual payments, and are priced at par value. Bond Sam has 4 years to maturity, whereas Bond Dave has 18 years to maturity. If interest rates suddenly rise by 2 percent, what is the percentage change in the price of Band Sam? Of Bond Dave? If rates were to suddenly fall by 2 percent instead, what would the percentage change in the price of Bond Sam be then? Of Bond Dave? Illustrate your answers by graphing bond prices versus YTM. What does this problem tell you about the interest rate risk of longer- term bonds? Q4: Bond is a 5 percent coupon bond. Bond Kis a 14 percent coupon bond. Both bonds have ten years to maturity, make semiannual payments, and have a YTM of 9 percent. If interest rates suddenly rise by 3 percent, what is the percentage price change of these bonds? What if rates suddenly fall by 3 percent instead? What does this problem tell you about the interest rate risk of lower-coupon bonds? Q5: River Corp. has 8.2 percent coupon bonds making annual payments with a YTM of 7.3 percent. The current yield on these bonds is 7.6 percent. How many years do these bonds have left until they mature?​

Answer 1

Answer:

Explanation:

N = 4 (5-year bond - 1 year (ago))*2 = 8

I% = YMT= 8/2 = 4

PMT = (1,000)(.07) = 70/2 = 35

FV=1,000

Calculating PV, PV=966.34