Bond Valuation Problem Set Quiz Questions 1. All work must be submitted – excel greatly preferred. If you can’t use excel (good luck!) all calculations mus

Bond Valuation Problem Set Quiz Questions 1. All work must be submitted – excel greatly preferred. If you can’t use excel (good luck!) all calculations must be memorialized and presented LEGIBLY. BOND VALUATION PROBLEM SET 1
Bond Value:
1. The $1,000 face value bond has a coupon rate of 6%, with interest paid semi-annually, and matures
in 5 years. If the bond is priced to yield 8%, what is the bond’s value today?
2. A bond has a 8% coupon rate (with interest paid semi-annually), a maturity value of $1,000, and
matures in 5 years. If the bond is priced to yield 6%, what is the bond’s current price?
3. A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity
of the bond now is 10%. What is the price today if pays 8% coupon rate semi-annually?
4. A 2-year zero-coupon note was issued on December 1, 2019. If its YTM is 1.95%, what is its
current market value?
Bond YTM:
1. The $1,000 face value bond has a coupon of 10% (paid semi-annually), matures in 4 years, and has
current price of $1,140. What is the bond’s yield to maturity?
2. A bond has an 8% coupon rate (semi-annual interest), a maturity value of $1,000, matures in 5
years, and a current price of $1,200. What is the bond’s yield-to-maturity?
3. Suppose you invest in zero coupon bonds and you are looking at a five-year zero-coupon that
matures on 2/22/2019, and which you want to buy on 2/22/2018. It has a face value of $1,000, and
its price is $990.10. If the one-year risk-free rate is 2%, what is the bond’s YTM?
4. You are looking at another 5-year zero-coupon bond which matures on 2/22/2020 paying $1,000,
and its price is $983.27. If the 2-year risk-free rate is 2.25%, what is the bond’s YTM?
Bond YTM 2nd Series:
1. Suppose you purchase a 25-year, $1000-face value, zero coupon bond for $357.80 when issued on
3/1/2020. What is the bond’s YTM?
2. Find the yield to maturity on a semiannual coupon bond you are thinking of buying today. The
bond price is $1128, the coupon rate is 6.5%, the face value is $1000, and was issued on Aug 15,
2013, maturing in 13 years.
3. Suppose you purchase a 25-year, $1000-face value, zero coupon bond for $357.80 when issued on
3/1/2020. What is the bond’s YTM?
4. What is the yield-to-maturity of a $1,000 zero-coupon 2-year note priced at 96.79 and maturing on
Dec. 15, 2019? Assume you bought the bond on February 21, 2018. Current rates are 3.5%.
Coupon Rate/Current Yield:
1. A bond has a current price of $800, a maturity value of $1,000, and matures in 5 years. If interest
is paid semi-annually and the bond is priced to yield 8%, what is the bond’s annual coupon rate?
2. Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There
are 2 years remaining until maturity. What is the current yield on the bond assuming that the
required return on the bond is 10%?
3. Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There
are 2 years remaining until maturity. What is the current yield on the bond assuming that the
required return on the bond is 10%?
4. A bond has a current price of $800, a maturity value of $1,000 (matures in 5 years). If interest is
paid semi-annually and the bond has a current yield of 8%, what is the bond’s annual coupon rate?
Duration Duration:
What is the duration of the following bonds (round to two decimal places)?
Terms:
Settlement Date
Issue Date:
Maturity Date:
Par Value (% of Par):
Price Now (% of Par):
Coupon Rate:
Current Yield:
Coupon Pmt Frequency:
1. Bond A
4/15/2020
12/15/2015
12/15/2035
100.00
5.50%
3.62%
2 (Semi-annual)
2. Bond B
4/15/2020
6/1/2018
6/1/2023
100.00
3. Bond C
4/15/2020
9/15/2012
9/15/2042
100.00
4. Bond D
4/15/2020
3/1/2019
3/1/2029
100.00
2.85%
1.9%
2 (Semi-annual)
(zero-coupon)
2.5%
2 (Semi-annual)
2.75%
2.11%
2 (Semi-annual)
Modified Duration:
What is the modified duration of the bonds in the previous section (round to two decimal places)?
1. _________
2. _________
3. _________
4. _________
Miscellaneous Bond Questions:
1. A municipal bond has a coupon rate of 4.5% and just sold for 104.56. It matures on December 1,
2023. What is its tax-equivalent yield? Assume a marginal tax rate of 40% and interest is paid June
1 and December 1.
2. Short answer essay: what is the mathematical difference between duration and modified duration,
and what does each one measure? (5 points)

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