Business Finance 620 Problem Set Bond Valuation You are considering a 10-year BBB-rated corporate bond with a $1,000 par value and a $69.00 annual coupon. The bond?s original-issue maturity is 15 years. 1. If you buy nine bonds, how much interest will you receive each time the bonds pay interest if the bond?s coupon is paid once a year at the end of the year? A. $621.00 B. $466.50 C. $310.50 D. $542.00 2. If your broker quoted an asked price of 98.375, how much would you pay for seven bonds (ignoring transaction costs)? A. $8,853.75 B. $5,495.48 C. $6,886.25 D. $9,837.50 3. If the market yield on comparable debt is 7.125%, how much should you be willing to pay for a bond today? A. $933 B. $1,071 C. $984 D. $1,000 4. At the correct price in Question 3, the bond would sell: A. at face value. B. at a discount to par. C. at par. D. at a premium to par. 5. By how much would the bond?s price change from today (Question 3) if you sold it seven years from today when the market yield on comparable debt had declined to 6.75%? A. The bond?s price would increase by $20. B. The bond?s price would decrease by $16. C. The bond?s price would increase by $38. D. The bond?s price would remain unchanged. 6. How much would the bond be worth at maturity (10 years from today) if the market yield on comparable debt rose to 7.45% at the end of the decade? A. $926 B. $1,075 C. $951 D. $1,000 rives_4 Microsoft Word - BFIN 620 Valuation Problem Set WI2010.doc
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