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53. Yield to Maturity A 5.75 percent coupon bond with 12 years left to maturity is offered for
sale at $978.83. What yield to maturity is the bond offering? (Assume interest payments are paid
semi-annually and par value is $1,000.)
54. Yield to Maturity A 4.25 percent coupon bond with eight years left to maturity is offered
for sale at $983.36. What yield to maturity is the bond offering? (Assume interest payments are
paid semi-annually and par value is $1,000.)
55. Yield to Call A 7.25 percent coupon bond with 25 years left to maturity can be called in
five years. The call premium is one year of coupon payments. It is offered for sale at $1,066.24.
What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and
par value is $1,000.)
56. Yield to Call A 4.75 percent coupon bond with 12 years left to maturity can be called in
two years. The call premium is one year of coupon payments. It is offered for sale at $1037.35.
What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and
par value is $1,000.)
57. Comparing Bond Yields A client in the 33 percent marginal tax bracket is comparing a
municipal bond that offers a 5 percent yield to maturity and a similar-risk corporate bond that
offers a 6.25 percent yield. Which bond will give the client more profit after taxes?
58. Comparing Bond Yields A client in the 28 percent marginal tax bracket is comparing a
municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that
offers a 4.10 percent yield. Which bond will give the client more profit after taxes?
59. Comparing Bond Yields A client in the 35 percent marginal tax bracket is comparing a
municipal bond that offers a 4.25 percent yield to maturity and a similar-risk corporate bond that
offers a 5.10 percent yield. Which bond will give the client more profit after taxes?
60. TIPS Total Return Reconsider a 3.25 percent TIPS that was issued with CPI reference of
186.7. The bond is purchased at the beginning of the year (after the interest payment), when the
CPI was 197.5. For the interest in the middle of the year, the CPI was 201.1. Now, at the end of
the year, the CPI is 202.4 and the interest payment has been made. What is the total return of the
TIPS in percentage terms for the year? (Assume semi-annual interest payments and $1,000 par
value.)
61. Bond Prices and Interest Rate Changes A 6.75 percent coupon bond with 10 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 6.65 percent. If this occurs, what would be the total return of the bond in
percent? (Assume semi-annual interest payments and $1,000 par value.)
62. Bond Prices and Interest Rate Changes A 7.25 percent coupon bond with 25 years left
to maturity is priced to offer a 7 percent yield to maturity. You believe that in one year, the yield
to maturity will be 7.15 percent. If this occurs, what would be the total return of the bond in
percent? (Assume semi-annual interest payments and $1,000 par value.)
63. Yields of a Bond A 3.25 percent coupon municipal bond has 12 years left to maturity and
has a price quote of 98.75. The bond can be called in five years. The call premium is one year of
coupon payments. What is the bond's taxable equivalent yield for an investor in the 35 percent
marginal tax bracket? (Assume interest payments are paid semi-annually and a par value of
$5,000.)
64. Yields of a Bond A 4.5 percent coupon municipal bond has 10 years left to maturity and
has a price quote of 97.75. The bond can be called in four years. The call premium is one year of
coupon payments. What is the bond's taxable equivalent yield for an investor in the 33 percent
marginal tax bracket? (Assume interest payments are paid semi-annually and a par value of
$5,000.)
65. Bond Ratings and Prices A corporate bond with a 5.75 percent coupon has 15 years left
to maturity. It has had a credit rating of BB and a yield to maturity of 6.25 percent. The firm has
recently gotten more financially stable and the rating agency is upgrading the bonds to BBB. The
new appropriate discount rate will be 6.00 percent. What will be the change in the bond's price in
dollars? (Assume interest payments are paid semi-annually and a par value of $1,000.)
66. Which of the following was the catalyst for the recent financial crisis?
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67. Which of the following is NOT true about EE savings bonds?
68. If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following
statements is true?
69. A 6.5 percent coupon bond with 12 years left to maturity can be called in four years. The
call premium is one year of coupon payments. It is offered for sale at $1,190.25. What is the yield
to call of the bond? (Assume interest payments are paid semi-annually and par value is $1,000.)
70. A 7.5 percent coupon bond with 16 years left to maturity is offered for sale at $834.92.
What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually
and par value is $1,000.)
71. An 8 percent coupon bond with 15 years to maturity is priced to offer a 9 percent yield to
maturity. You believe that in one year, the yield to maturity will be 6.5 percent. What is the
change in price the bond will experience in dollars? (Assume annual interest payments and par
value is $1,000.)
72. Calculate the price of a 6.5 percent coupon bond with 27 years left to maturity and a
market interest rate of 5 percent. (Assume interest payments are semiannual and par value is
$1,000.) Is this a discount or premium bond?
73. Calculate the price of a 6.5% coupon bond with 17 years left to maturity and a market
interest rate of 10.5%. (Assume interest rates are semiannual and par value is $1,000.) Is this a
discount or premium bond?
74. Calculate the price of a zero coupon bond that matures in 20 years if the market interest
rate is 8.5 percent. (Assume annual compounding and a par value of $1,000.)
