The Boston Clothing Co. has $1,000 face value bond outstanding with a market pri

Question

The Boston Clothing Co. has $1,000 face value bond outstanding with a market price of $1,006. The bond pays interest annually, matures in 14 years, and has a yield to maturity of 8.7 percent. What is the coupon rate? (Enter rate in percents, accurate to two decimal places.)

Question 2

Last year, you earned a rate of return of 8.16 percent on your bond investments. During that time, the inflation rate was 2.89 percent. What was your real rate of return?

Use the exact relationship between real and nominal rates. Enter answer in percents, accurate to two decimal places.

Question 3

GDebi, Inc. plans to issue 6.1 percent coupon bonds, with annual coupon frequency, 17 years to maturity and $1000 face value. If the prevailing market yield on bonds of similar riskiness and maturity is 8.2 percent, what would be the market price of GDebi's bonds?

Question 4

HexChat, Inc. has issued 16 year bonds 5 years ago. The bonds pay semiannual coupons, with a coupon rate of 3.3 percent, and $1000 face value. If your required return on this investment is 7.1 percent APR, how much would you be willing to pay for this bond?

Explanation / Answer

1)

Face value (FV) $                                         1,000 Number of compounding periods per year 1 Number of years to maturity 14 Number of compounding periods till maturity (NPER) 14 Market rate of return/Required rate of return 8.70% Market rate of return/Required rate of return per period (RATE) 8.70% Bond price (PV) $                               (1,006.000) Coupon payment (PMT) PMT(RATE,NPER,PV,FV) Coupon payment (PMT) $87.76 Coupon rate (Coupon payment×Compoundings per year )÷FV 8.78%

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