1. Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five

year bond issued by Venice Corp. that pays an annual coupon of 5.69 percent. If the current market rate is 6.69 percent, what is the maximum amount Pierre should be willing to pay for this bond? (Round answer to 2 decimal places, e.g. 15.25.)

2. Diane Carter is interested in buying a five

year zero coupon bond with a face value of $1,000. She understands that the market interest rate for similar investments is 9.28 percent. Assume annual coupon payments. what is the current value of this bond? (Round answer to 2 decimal places, e.g. 15.25.)

3. Rockne, Inc., has outstanding bonds that will mature in six years and pay an 8 percent coupon semiannually. If you paid $1,016.02 today and your required rate of return was 7.01 percent.

What is the worth of the bond? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)

What is the worth of the bond?

Did you pay the right price for the bond?

4. Four years ago, Lisa Stills bought six

year, 12.12 percent coupon bonds issued by the Fairways Corp. for $947.68. If she sells these bonds at the current price of $862.55, what will be her realized yield on the bonds? Assume similar coupon

paying bonds make annual coupon payments. (Round answer to 2 decimal places, e.g. 15.25%.)

Realised rate of return

5. Adrienne Dawson is planning to buy 10

year zero coupon bonds issued by the U.S. Treasury. If these bonds have a face value of $1,000 and are currently selling at $418.23, what is the expected return on them?

Assume that interest compounds semiannually on similar coupon paying bonds. (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

6. Trevor Price bought 10

year bonds issued by Harvest Foods five years ago for $1,007.65. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,069.65, what is the yield that Trevor would earn by selling the bonds today? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

What is the Effective annual yield

7. Maryland Department of Transportation has issued 25

year bonds that make semiannual coupon payments at a rate of 9.71 percent. The current market rate for similar securities is 10.47 percent.

a. What is the current market value of one of these bonds? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answer to 2 decimal places, e.g. 15.25.)

What is the current market value

b. What will be the bond’s price if rates in the market (i) decrease to 8.47 percent or (ii) increase to 12.47 percent? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answer to 2 decimal places, e.g. 15.25.)

Decrease to 8.47%

(i) Decrease to 8.47 percent $

(ii) Increase to 12.47 percent $

c. How do the interest rate changes affect premium bonds and discount bonds?

d. Suppose the bond were to mature in 12 years. What will be the bond’s price if rates in the market (i) decrease to 8.47 percent or (ii) increase to 12.47 percent? (Round intermediate calculations to 2 decimal places, e.g. 1.25 and final answer to 2 decimal places, e.g. 15.25.)