Bonds and their valuation (Difficulty: e = Easy, m = Medium, and t = Tough) Multiple Choice: Conceptual

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TB Chapter07

Yield to call--semiannual bond Answer: b Diff: M N

a. 4.62%

b. 10.32%

c. 17.22%

d. 5.16%

e. 2.31%
Yield to call-–semiannual bond Answer: b Diff: M

¹⁰⁰. Hood Corporation recently issued 20-year bonds. The bonds have a coupon rate of 8 percent and pay interest semiannually. Also, the bonds are callable in 6 years at a call price equal to 115 percent of par value. The par value of the bonds is $1,000. If the yield to maturity is
7 percent, what is the yield to call?
a. 8.33%

b. 7.75%

c. 9.89%

d. 10.00%

e. 7.00%
Yield to call--semiannual bond Answer: d Diff: M

¹⁰¹. A 12-year bond with a 10 percent semiannual coupon and a $1,000 par value has a nominal yield to maturity of 9 percent. The bond can be called in five years at a call price of $1,050. What is the bond’s nominal yield to call?
a. 4.50%

b. 8.25%

c. 8.88%

d. 8.98%

e. 9.00%
Yield to call--semiannual bond Answer: c Diff: M

¹⁰². A corporate bond with an 11 percent semiannual coupon has a yield to maturity of 9 percent. The bond matures in 20 years but is callable in 10 years. The maturity value is $1,000. The call price is $1,055.
What is the bond’s yield to call?
a. 8.43%

b. 8.50%

c. 8.58%

d. 8.65%

e. 9.00%
Yield to call--semiannual bond Answer: b Diff: M

¹⁰³. McGriff Motors has bonds outstanding that will mature in 12 years. The bonds pay a 12 percent semiannual coupon and have a face value of $1,000 (that is, the bonds pay a $60 coupon every six months). The bonds currently have a yield to maturity of 10 percent. The bonds are callable in 8 years and have a call price of $1,050. What is the bonds’ yield to call?
a. 8.89%

b. 9.89%

c. 9.94%

d. 10.00%

e. 12.00%
Yield to call--semiannual bond Answer: c Diff: M

¹⁰⁴. A 12-year bond has a 10 percent semiannual coupon and a face value of $1,000. The bond has a nominal yield to maturity of 7 percent. The bond can be called in five years at a call price of $1,050. What is the bond’s nominal yield to call?
a. 5.29%

b. 5.40%

c. 5.33%

d. 5.76%

e. 4.56%
Yield to call--semiannual bond Answer: c Diff: M

¹⁰⁵. A 12-year, $1,000 face value bond has an 8 percent semiannual coupon and a nominal yield to maturity of 6 percent. The bond is callable in
5 years at a call price of $1,040. What is the bond’s nominal yield to call?
a. 1.76%

b. 8.27%

c. 4.86%

d. 3.52%

e. 5.22%

Yield to call--semiannual bond Answer: b Diff: M N

¹⁰⁶. A 10-year bond sells for $1,075. The bond has a 9 percent semiannual coupon and a face value of $1,000. (That is, the bond pays a $45 coupon every six months.) The bond is callable in 5 years and the call price is $1,035. What is the bond’s nominal yield to call?
a. 7.19%

b. 7.75%

c. 7.90%

d. 8.00%

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