Question 1:
Rank from highest credit risk to lowest risk the following bonds, with the same time to maturity, by their yield to maturity: (Rank: 1 = highest, 4 = lowest)
| Treasury bond with yield of 5.55 percent | 4 |
| IBM bond with yield of 7.49 percent | 2 |
| Trump Casino bond with yield of 8.76 percent | 1 |
| Banc One bond with a yield of 5.99 percent | 3 |
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Question 2:
Determine the interest payment for the following three bonds. (Assume a $1,000 par value.) (Round your answers to 2 decimal places.)
| 3 ½ percent coupon corporate bond (paid semiannually) | |
| 4.25 percent coupon Treasury note | |
| Corporate zero-coupon bond maturing in 10 years |
Question 3:
What's the current yield of a 3.8 percent coupon corporate bond quoted at a price of 102.08? (Round your answer to 2 decimal places.)
Question 4:
A 6 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
| Amount paid |
Question 5:
A bond issued by Ford on May 15, 1997 is scheduled to mature on May 15, 2097. If today is November 16, 2014, what is this bond’s time to maturity? (Use 365 days a year.)
| Time to maturity | 83 | years and | 6 | Months. |
May 15, 2097 minus November 16, 2014 equals 83 years and 6 months
