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33. Call Premium A 4.5 percent corporate coupon bond is callable in five years for a call
premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid
to the bondholder if the issuer calls the bond?
34. TIPS Interest and Par Value A 2.5 percent TIPS has an original reference CPI of 170.4. If
the current CPI is 205.7, what is the current interest payment and par value of the TIPS?
(Assume semi-annual interest payments and $1,000 par value.)
35. TIPS Interest and Par Value A 3.75 percent TIPS has an original reference CPI of 175.8.
If the current CPI is 207.7, what is the current interest payment and par value of the TIPS?
(Assume semi-annual interest payments and $1,000 par value.)
36. Bond Quotes Consider the following three bond quotes; a Treasury note quoted at 87:25,
and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. If the Treasury
and corporate bonds have a par value of $1,000 and the municipal bond has a par value of
$5,000, what is the price of these three bonds in dollars?
37. Bond Quotes Consider the following three bond quotes; a Treasury note quoted at
102:30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the
Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value
of $5,000, what is the price of these three bonds in dollars?
38. Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 10
years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par
value.)
39. Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in five
years if the market interest rate is 7.50 percent. (Assume semi-annual compounding and $1,000
par value.)
40. Current Yield What's the current yield of a 6 percent coupon corporate bond quoted at a
price of 101.70?
41. Current Yield What's the current yield of a 5.75 percent coupon corporate bond quoted at
a price of 103.05?
42. Current Yield What's the current yield of an 8.15 percent coupon corporate bond quoted
at a price of 94.30?
43. Taxable Equivalent Yield What's the taxable equivalent yield on a municipal bond with a
yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket?
44. Taxable Equivalent Yield What is the taxable equivalent yield on a municipal bond with
a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?
45. Credit Risk and Yield Rank the following bonds in order from lowest credit risk to
highest risk all with the same time to maturity, by their yield to maturity: JM Corporate bond with
yield of 12.25 percent, IB Corporate bond with yield of 4.49 percent, TC Corporate bond with yield
of 8.76 percent, and B&O Corporate bond with a yield of 5.99 percent.
46. TIPS Capital Return Consider a 2.75 percent TIPS with an issue CPI reference of 184.2.
At the beginning of this year, the CPI was 195.4 and was at 200.5 at the end of the year. What
was the capital gain of the TIPS in dollars?
47. TIPS Capital Return Consider a 3.25 percent TIPS with an issue CPI reference of 186.7.
At the beginning of this year, the CPI was 197.5 and was at 202.4 at the end of the year. What
was the capital gain of the TIPS in dollars? (Assume semi-annual interest payments and $1,000
par value.)
48. TIPS Capital Return Consider a 3.75 percent TIPS with an issue CPI reference of 183.5.
At the beginning of this year, the CPI was 190.6 and was at 199.4 at the end of the year. What
was the capital gain of the TIPS in percentage terms? (Assume semi-annual interest payments
and $1,000 par value.)
49. Compute Bond Price Compute the price of a 4.75 percent coupon bond with 15 years left
to maturity and a market interest rate of 6.25 percent. (Assume interest payments are semi-
annual and par value is $1,000.) Is this a discount or premium bond?
50. Compute Bond Price Compute the price of a 6 percent coupon bond with 10 years left to
maturity and a market interest rate of 8.75 percent. (Assume interest payments are semi-annual
and par value is $1,000.) Is this a discount or premium bond?
51. Bond Prices and Interest Rate Changes A 6 percent coupon bond with 12 years left to
maturity is priced to offer a 6.5 percent yield to maturity. You believe that in one year, the yield to
maturity will be 6.25 percent. What is the change in price the bond will experience in dollars?
(Assume semi-annual interest payments and $1,000 par value.)
52. Bond Prices and Interest Rate Changes A 5.5 percent coupon bond with 18 years left to
maturity is priced to offer a 6.25 percent yield to maturity. You believe that in one year, the yield
to maturity will be 5.75 percent. What is the change in price the bond will experience in dollars?
(Assume semi-annual interest payments and $1,000 par value.)
