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BONDS PRACTICE QUESTIONS 7-21 Compute Bond Price Compute the price of a 4.5 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?

LG4

7-23 Compute Bond Price Calculate the price of a 5.2 percent coupon bond with 18 years left to maturity and a market interest rate of 4.6 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?

LG5

7-25 Bond Prices and Interest Rate Changes A 5.75 percent coupon bond with ten years left to maturity is priced to offer a 6.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.0 percent. What is the change in price the bond will experience in dollars?

LG5

7-35 Bond Prices and Interest Rate Changes A 6.25 percent coupon bond with 22 years left to maturity is priced to offer a 5.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.0 percent. If this occurs, what would be the total return of the bond in dollars and percent? (Assume interest payments are semiannual.)

LG7

7-39 Bond Ratings and Prices A corporate bond with a 6.5 percent coupon has 15 years left to maturity. It has had a credit rating of BBB and a yield to maturity of 7.2 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB. The new appropriate discount rate will be 8.5 percent. What will be the change in the bond’s price in dollars and percentage terms? (Assume interest payments are semiannual.)...