A bond with face value of $500 is redeemable at par in 8 years. The coupon (interest)….. (only answers no workings)

Question 1
A bond with face value of $500 is
redeemable at par in 8 years. The coupon (interest) rate is 9.8% p.a. payable
half-yearly. What price should be paid for the bond by an investor (who pays
tax at 30.0% on interest) to produce a net yield to maturity of 6.6% p.a.
convertible half-yearly?

Question 2

A
debenture with face value of $100 pays interest at j4 = 14% and will mature 7
years from today at par. What net yield to maturity, j4 (as a %, 2 decimal
places), would an investor taxed at 30% on interest obtain if the debenture was
purchased for $84.60? Use the APPROXIMATE yield formula.

Question 3
A debenture with face value of $100 pays interest
at j4 = 14% and will mature 7 years from today at par. What net yield to
maturity, j4 (as a %, 2 decimal places) would an investor taxed at 30% on
interest obtain if the debenture was purchased for $860? Use LINEAR INTERPOLATION
between 3% and 3.5% for the quarterly yield.

Question 4
A bond with face value of $100 pays interest at j2
= 7.1% and is redeemable at par on 1 June 2019. What price should be paid for
the bond on 29 August 2012 by an investor liable to tax on interest at 25% who
wants to earn a net yield of 5.1% p.a. effective? Use compound interest for the
fractional interest period.
(As the interest payments are half-yearly, the
yield will need to be converted to a half-yearly rate to match the frequency of
the payments. Use the unrounded yield (store it in the memory of your
calculator) or your answer will probably be marked as incorrect.)

Question 5

A bond with face value of $100 pays
interest at j2 = 7.4% and is redeemable at par in 5.5 years’ time. Calculate
the price which should be paid for the bond if a net yield to maturity of 6.5%
p.a. convertible half-yearly is required and tax on both interest and capital
gains is at the rate of 25%.

Question 6
A bond with face value of $100 pays interest at j2
= 7% and is redeemable at par in 10 years’ time. The bond is purchased for
$93.8. Calculate the net redemption payment allowing for capital gains tax at
the rate of 25% if the bond is held to maturity.

Question 7

A bond
was bought for $81 and sold for $97.2. The capital gains tax which will be
payable is $3.7. Calculate the rate of capital gains tax (as a %, 2 decimal
places).

Question 8
A bond with face value of $100 pays interest at j2
= 7.0% and is redeemable at par 7.5 years from now.

Three years ago, Joanna purchased the bond for
$94.2. Joanna pays tax on interest at the rate of 30% and tax on capital gains
at the rate of 20%.

If she holds the bond to maturity, use the
APPROXIMATE formula (suitably adjusted to take account of taxation) to
calculate the net yield, j2, earned by Joanna over the 10.5 years of her
investment (as a %, 2 decimal places).

Question 9
Question text
Continuation of previous question.

If Joanna sells the bond today for $91.6, use the
APPROXIMATE formula (suitably adjusted to take account of taxation) to
calculate the net yield, j2, earned by Joanna over the 3 years of her
investment (as a %, 2 decimal places). Ignore taxation on the capital loss.

(The C value will be the sale payment.)

Question 10
A bond with face value of $100 has interest
payments of $3.5 on 1 December 2012 and $4 each half-year thereafter. The bond
matures at par on 1 December 2018. The bond is bought on 2 October 2012 at a
price to give a gross yield to maturity of j2 = 6.1%.
Calculate the price paid. Use the Reserve Bank
method.
(First calculate the price on 1 December 2012,
ignoring the interest payment on that date. Then add in the interest payment
and move the resulting price back to 2 October 2012.)

Question 11

In a government bond tender the coupon rate
was j2 = 6.5% and the weighted average yield was j2 = 6%. At this yield the
bonds were issued

Select one:
a. at a premium to the face value.
b. at a discount to the face value. Incorrect

Question 12

A Treasury Bond is

Select one:
a. Short-term equity
b. Short-term debt Incorrect
c. Long-term equity
d. Long-term debt

Question 13

Look up the financial pages of a newspaper.

Select one:
a. The yield on Australian government Treasury
Bonds is less than the yield on NSW Treasury Bonds.
b. The yield on Australian government Treasury
Bonds is greater than the yield on NSW Treasury Bonds. The

Question 14

A capital indexed bond with face value of
$1,000 pays interest each quarter at 1% of the indexed capital value. The index
increases by 0.45% compound at the end of each of the first 7 quarters and by
0.74% compound at the end of each of the next 3 quarters. Calculate the
interest payment at the end of the 10th quarter.

Question 15

The successful bidders for Treasury bonds
were:
Bidder A for $140 million face value at a yield of
6.61% p.a.
Bidder B for $50 million face value at a yield of
6.68% p.a.
Bidder C for $210 million face value at a yield of
6.76% p.a.

Calculate the weighted average yield (as a %, 2
decimal places) at which the Reserve Bank would be allocated bonds.