{"id":482,"date":"2023-03-28T15:56:28","date_gmt":"2023-03-28T15:56:28","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/?post_type=chapter&p=482"},"modified":"2023-04-03T00:15:14","modified_gmt":"2023-04-03T00:15:14","slug":"review-problems-3","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/chapter\/review-problems-3\/","title":{"raw":"Review Problems","rendered":"Review Problems"},"content":{"raw":"
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\r\n

Chapter 7 Review Problems<\/h2>\r\n1<\/span>. <\/span>A $1,000 Expo Corp. bond has a coupon rate of 5%, pays interest semiannually, and matures in six years. If the yield to maturity is 7%, what is the bond\u2019s value today?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n2<\/span>. <\/span>A $1,000 Omega Corp. bond has an 8% coupon rate that is paid semiannually. The bond matures in three years. If the current price of the bond is $1,125, what is the yield to maturity?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n3<\/span>. <\/span>You are considering buying a bond that is currently priced at $830, has a face value of $1,000, and matures in seven years. If interest is paid semiannually and the bond has a yield to maturity of 6%, what is the bond\u2019s annual coupon rate?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n4<\/span>. <\/span>A $1,000 Noah Corp. bond has a coupon rate of 5% with semiannual payments, matures in 10 years, and has a yield to maturity of 6.5%. What is the bond\u2019s current price?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n5<\/span>. <\/span>Chronowerx Inc. has issued a bond that has a face value of $1,000, a 3% coupon rate (with semiannual interest), and a maturity date four years from now. If the bond\u2019s current price is $895, what is its yield to maturity?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n6<\/span>. <\/span>You are considering adding a $1,000, 25-year bond to your portfolio. It has a coupon rate of 8%, which is paid annually, and your required return is 10%. What is the current price of the investment?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n7<\/span>. <\/span>A Cameron Corp. bond has a $1,000 par value, a 5 percent coupon rate paid semiannually, and nine years until maturity. If similar investments yield 6%, what is the current value of Cameron Corp. bonds?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n8<\/span>. <\/span>McLaren Motors just issued a series of $1,000.00 bonds with a 10-year maturity and an 8% coupon rate, paid quarterly. If you purchase a McLaren bond at a price of $920.00, what is your required rate of return?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n9<\/span>. <\/span>Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the coupon rate on Petty Partners bonds, and what is the annual interest payment?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n10<\/span>. <\/span>A $1,000 Riker Corp. bond has a 20-year maturity and a 6% coupon rate, with interest paid annually. If similar bonds from Riker Corp. are yielding 4%, what is the current market value of the Riker issue?<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n
\r\n
\r\n\r\n \r\n\r\n11<\/span>. <\/span>A $1,000 bond that matures in eight years, has quarterly coupon payments of $25, and is currently priced at $962.00 will have a yield to maturity of ________.<\/span>\r\n\r\n<\/div>\r\n<\/div>\r\n \r\n\r\nAttribution:<\/strong>\r\n\r\nThis chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.","rendered":"
\n
\n

Chapter 7 Review Problems<\/h2>\n

1<\/span>. <\/span>A $1,000 Expo Corp. bond has a coupon rate of 5%, pays interest semiannually, and matures in six years. If the yield to maturity is 7%, what is the bond\u2019s value today?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

2<\/span>. <\/span>A $1,000 Omega Corp. bond has an 8% coupon rate that is paid semiannually. The bond matures in three years. If the current price of the bond is $1,125, what is the yield to maturity?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

3<\/span>. <\/span>You are considering buying a bond that is currently priced at $830, has a face value of $1,000, and matures in seven years. If interest is paid semiannually and the bond has a yield to maturity of 6%, what is the bond\u2019s annual coupon rate?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

4<\/span>. <\/span>A $1,000 Noah Corp. bond has a coupon rate of 5% with semiannual payments, matures in 10 years, and has a yield to maturity of 6.5%. What is the bond\u2019s current price?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

5<\/span>. <\/span>Chronowerx Inc. has issued a bond that has a face value of $1,000, a 3% coupon rate (with semiannual interest), and a maturity date four years from now. If the bond\u2019s current price is $895, what is its yield to maturity?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

6<\/span>. <\/span>You are considering adding a $1,000, 25-year bond to your portfolio. It has a coupon rate of 8%, which is paid annually, and your required return is 10%. What is the current price of the investment?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

7<\/span>. <\/span>A Cameron Corp. bond has a $1,000 par value, a 5 percent coupon rate paid semiannually, and nine years until maturity. If similar investments yield 6%, what is the current value of Cameron Corp. bonds?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

8<\/span>. <\/span>McLaren Motors just issued a series of $1,000.00 bonds with a 10-year maturity and an 8% coupon rate, paid quarterly. If you purchase a McLaren bond at a price of $920.00, what is your required rate of return?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

9<\/span>. <\/span>Three years ago, Petty Partners Inc. issued 15-year, $1,000 bonds that are currently priced at $911.37. If the prevailing rate of return on similar investments is 5%, what is the coupon rate on Petty Partners bonds, and what is the annual interest payment?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

10<\/span>. <\/span>A $1,000 Riker Corp. bond has a 20-year maturity and a 6% coupon rate, with interest paid annually. If similar bonds from Riker Corp. are yielding 4%, what is the current market value of the Riker issue?<\/span><\/p>\n<\/div>\n<\/div>\n

\n
\n

 <\/p>\n

11<\/span>. <\/span>A $1,000 bond that matures in eight years, has quarterly coupon payments of $25, and is currently priced at $962.00 will have a yield to maturity of ________.<\/span><\/p>\n<\/div>\n<\/div>\n

 <\/p>\n

Attribution:<\/strong><\/p>\n

This chapter is from \u201cPrinciples of Finance\u201d \u00a0https:\/\/openstax.org\/books\/principles-finance\/pages\/1-why-it-matters<\/a> by Dahlquist and Knight. This book is licensed under the CC-BY<\/a> 4.0 license. 2022 OpenStax.<\/p>\n","protected":false},"author":101,"menu_order":13,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-482","chapter","type-chapter","status-publish","hentry"],"part":32,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/482","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/users\/101"}],"version-history":[{"count":4,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/482\/revisions"}],"predecessor-version":[{"id":1306,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/482\/revisions\/1306"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/parts\/32"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapters\/482\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/media?parent=482"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/pressbooks\/v2\/chapter-type?post=482"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/contributor?post=482"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/ppscacc2010principlesoffinance\/wp-json\/wp\/v2\/license?post=482"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}