CHAPTER 7 BONDS AND THEIR VALUATION

Yield to call–annual bond

[i]. A bond that matures in 11
years has an annual coupon rate of 8 percent with interest paid annually. The bond’s face value is $1,000, and its
yield to maturity is 7.5 percent. The
bond can be called 3 years from now at a price of $1,060. What is the bond’s nominal yield to call?

a. 9.82%
b. 8.41%
c. 8.54%
d. 8.38%
e. 7.86%

Yield to call–semiannual
bond

[ii]. A corporate bond with 12
years to maturity has a 9 percent semiannual coupon and a face value of
$1,000. (That is, the semiannual coupon
payments are $45.) The bond has a
nominal yield to maturity of
7 percent. The bond can be called in
three years at a call price of $1,045.
What is the bond’s nominal yield to call?

a.
4.62%
b. 10.32%
c. 17.22%
d. 5.16%
e. 2.31%

Yield to call-–semiannual
bond

[iii]. Hood Corporation recently
issued 20-year bonds. The bonds have a
coupon rate of 8 percent and pay interest semiannually. Also, the bonds are callable in 6 years at a
call price equal to 115 percent of par value. The par value of the bonds is
$1,000. If the yield to maturity is
7 percent, what is the yield to call?

a. 8.33%
b. 7.75%
c. 9.89%
d. 10.00%
e. 7.00%

Yield to call–semiannual
bond
[iv]. A 12-year bond with a 10
percent semiannual coupon and a $1,000 par value has a nominal yield to
maturity of 9 percent. The bond can be
called in five years at a call price of $1,050.
What is the bond’s nominal yield to call?

a. 4.50%
b. 8.25%
c. 8.88%
d. 8.98%
e. 9.00%

Yield to call–semiannual
bond

[v]. A corporate bond with an
11 percent semiannual coupon has a yield to maturity of 9 percent. The bond matures in 20 years but is callable
in 10 years. The maturity value is
$1,000. The call price is $1,055.
What is the bond’s yield to call?

a. 8.43%
b. 8.50%
c. 8.58%
d. 8.65%
e. 9.00%

Yield to call–semiannual
bond

[vi]. McGriff Motors has bonds
outstanding that will mature in 12 years.
The bonds pay a 12 percent semiannual coupon and have a face value of
$1,000 (that is, the bonds pay a $60 coupon every six months). The bonds currently have a yield to maturity
of 10 percent. The bonds are callable in
8 years and have a call price of $1,050.
What is the bonds’ yield to call?

a. 8.89%
b. 9.89%
c. 9.94%
d. 10.00%
e. 12.00%

Yield to call–semiannual
bond

[vii]. A 12-year bond has a 10
percent semiannual coupon and a face value of $1,000. The bond has a nominal yield to maturity of 7
percent. The bond can be called in five
years at a call price of $1,050. What is
the bond’s nominal yield to call?

a. 5.29%
b. 5.40%
c. 5.33%
d. 5.76%
e. 4.56%

Yield to call–semiannual
bond

[viii]. A 12-year, $1,000 face value
bond has an 8 percent semiannual coupon and a nominal yield to maturity of 6
percent. The bond is callable in
5 years at a call price of $1,040. What
is the bond’s nominal yield to call?

a. 1.76%
b. 8.27%
c. 4.86%
d. 3.52%
e. 5.22%

Yield
to call–semiannual bond

[ix]. A 10-year bond sells for
$1,075. The bond has a 9 percent
semiannual coupon and a face value of $1,000.
(That is, the bond pays a $45 coupon every six months.) The bond is callable in 5 years and the call
price is $1,035. What is the bond’s
nominal yield to call?

a. 7.19%
b. 7.75%
c. 7.90%
d. 8.00%
e. 8.13%