The Blackburn Group has recently issued 20-year, unsecured bonds rated BB by Moody's. These bonds yield 443 basis points above the U.S. Treasury yield of 2.76%. The yield to maturity on these bonds is
A) 4.43%.
B) 7.19%.
C) 12.23%.
D) mortgage bonds.
Colby & Company bonds pay semiannual interest of $50. They mature in 15 years and have a par value of $1,000. The market rate of interest is 8%. The market value of Colby bonds is (round to the nearest dollar)
A) $1,173.
B) $743.
C) $1,000.
D) $827.
Caldwell, Inc. sold an issue of 30-year, $1,000 par value bonds to the public. The bonds carry a 10.85% coupon rate and pay interest semiannually. It is now 12 years later. The current market rate of interest on the Caldwell bonds is 8.45%. What is the current market price (intrinsic value) of the bonds? Round off to the nearest $1.
A) $751
B) $1,177
C) $1,220
D) $976
The yield to maturity on a bond
A) is fixed in the indenture.
B) is lower for higher-risk bonds.
C) is the required return on the bond.
D) is generally equal to the coupon interest rate.
All of the following affect the value of a bond EXCEPT
A) investors' required rate of return.
B) the recorded value of the firm's assets.
C) the coupon rate of interest.
D) the maturity date of the bond.
A $1,000 par value 10-year bond with a 10% coupon rate recently sold for $900. The yield to maturity
A) is 10%.
B) is greater than 10%.
C) is less than 10%.
D) cannot be determined.
Sterling Corp. bonds pay 10% annual interest and are selling at 97. The market rate of interest
A) is less than 10%.
B) is greater than 10%.
C) equals 10%.
D) cannot be determined.
