Bonner Metals wants to issue new 18-year bonds for some much-needed expansion projects

Bond S is a 4 percent coupon bond. Bond T is a 10 percent coupon bond. Both bonds have 11 years to maturity, make semiannual payments, and have a yield-to-maturity of 7 percent. If interest rates suddenly rise by 2 percent, what will the percentage change in the price of Bond T be?    A.  -15.16 percent B.  -14.87 percent C.  -13.56 percent D.  -12.92 percent E.  -12.67 percent     Percentage change in price = ($1,068.92 - $1,227.51)/$1,227.51 = -12.92 percent

120.

Technical Sales, Inc. has 6.6 percent coupon bonds on the market with 9 years left to maturity. The bonds make semiannual payments and currently sell for 92.5 percent of par. What is the effective annual yield?    A.  7.34 percent B.  7.40 percent C.  7.52 percent D.  7.93 percent E.  8.60 percent   This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct.   Effective annual rate = [1 + (0.07774/2)]2 - 1 = 7.93 percent

121.

Bonner Metals wants to issue new 18-year bonds for some much-needed expansion projects. The company currently has 11 percent bonds on the market that sell for $1,459.51, make semiannual payments, and mature in 18 years. What should the coupon rate be on the new bonds if the firm wants to sell them at par?    A.  5.75 percent B.  6.23 percent C.  6.41 percent D.  6.60 percent E.  6.79 percent   This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct.   To sell a bond at par, the coupon rate must be set equal to the required return.

122.

You purchase a bond with an invoice price of $1,460. The bond has a coupon rate of 7.5 percent, and there are 3 months to the next semiannual coupon date. What is the clean price of this bond?    A.  $1,441.25 B.  $1,452.17 C.  $1,460.00 D.  $1,467.83 E.  $1,483.50 Accrued interest = (0.075 × $1,000) × (3/12) = $18.75 Clean price = $1,460 - $18.75 = $1,441.25