Money and Banking

1. A bond with face value $1000 has a coupon rate of 8% and the market rate of 10%. What is the bond’s price? 2. A 6-year ABC bond (face value of $1000) pays interest of $80 annually and sells for $950. What are its coupon rate, and yield to maturity? If ABC wants to issue a new 6-year bond at the same face value and price, what will the new coupon rate be? 3. A 30-year Treasury bond is issued with face value of $1000, paying interest of $60 per year. If market yields increase shortly after the T-bond is issued, what happens to the bond’s a. coupon rate? b. price? c. yield to maturity? 4. If a bond with face value of $1,000 and a coupon rate of 8% is selling for $970, is the bond’s yield to maturity more or less than 8%? 5. A bond has 10 years until maturity, a coupon rate of 8%, and sells for $1100. d. What is the current yield on the bond? e. What is the yield to maturity f. If after one year from now the bond has a yield to maturity of 8%, what will its price be? What will be the rate of return on the bond? g. If the inflation rate during the year is 3%, what is the real rate of return on the bond? 6. Fill in the table below for the following zero-coupon bonds. The face value of each bond is $1,000. Price | Maturity (years) | Yield to maturity | $300 | 30 | - | $360 | * | 8% | - | 10 | 10% | 7. BH has issued consol bonds with coupon payments of $60. If the required rate of return on these bonds (market rate) at the time they were issued was 6%, at what price were they sold to the public? If the required return today is 10%, at what price do the consol bonds sell? 8. SH Corp. has issued 9% annual coupon bonds with a face value of 1000 USD that are now selling at a yield to maturity of 10%. What is the price of these bonds? 9. LA bonds sell for $1065,15; mature in 9 years, and the yield to maturity is 7%. What must be the coupon rate on the bonds? 10. Calculate the