Finance

1 Jackson Corporation’s bonds have 6 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 7.5%. The bonds have a yield to maturity of 11%. What is the current market price of these bonds? Round your answer to the nearest cent.

 

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2 The real risk-free rate is 4%. Inflation is expected to be 1% this year and 4% during the next 2 years. Assume that the maturity risk premium is zero.

a) What is the yield on 2-year Treasury securities? Round your answer to two decimal places.

b) What is the yield on 3-year Treasury securities? Round your answer to two decimal places.

 

3 The real risk-free rate is 3%, and inflation is expected to be 4% for the next 2 years. A 2-year Treasury security yields 8.8%. What is the maturity risk premium for the 2-year security?

 

4 Thatcher Corporation’s bonds will mature in 20 years. The bonds have a face value of $1,000 and an 12% coupon rate, paid semiannually. The price of the bonds is $850. The bonds are callable in 5 years at a call price of $1,050. Round your answers to two decimal places.

a) What is their yield to maturity?

B) What is their yield to call?

 

5 The Brownstone Corporation’s bonds have 7 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%.

a) What is the yield to maturity at a current market price of $858? Round your answer to two decimal places.

b) What is the yield to maturity at a current market price of $1,154? Round your answer to two decimal places

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