Practice Problems on Finance

1.Stiles Corporation issues a new series of adhesivenesss on January 1, 1982. The bonds were interchange at part ($1000), had a 12% coupon, and matured in 30 years, on December 31, 2011. Coupon payments are make semi yearbookly (on June 30 and December 31). a)What was the YTM on January 1, 1982? - rationalize b)What was the price of the bonds on January 1, 1987, 5 years later, assuming that interest rates had travel to 10%? (Show in equation form, plug all the germane(predicate) numbers and without calculation, say whether the price would be above or below the par value) c)Assume price you calculated is $1150. govern the current yield, capital gains yield, and total turn over on January 1, 1987. Explain what individually of the calculated terms indicate. d)On July 1, 2005, 6.5 years to begin with maturity, Penningtons bonds sold for &916.42. What was the YTM, the current yield, capital gains yield, and total return at that time? (No need to calculate them, but army in equation form, and conclude whether they increased, decreased or stayed the uniform and why) e)Now assume that you plan to purchase an outstanding Pennington bond on March 1, 2005, when the going rate of interest presumption its risk was 15.5%. How large a check must you keep open to complete the transaction? 2.

A bonds judge return is sometimes estimated by its YTM and sometimes by its YTC. low what conditions would the YTM provide a snap off estimate and when would the YTC be better? EXPLAIN 3.An investor has two bonds in his portfolio that both have a event value of $1000 and pay a 10% annual coupon. bail bond L matures in 15 years, while alinement S matures in 1 year. a)What will the value of each bond be if the going interest rate is 5%, 8%, and 12%? Assume that there is only adept more than interest payment to be made on Bond S. at its maturity, and 15 more payments on Bond L. b)Why does the longer-term bonds price vary more when interest rates change than does that of the shorter-term bond? 4.Last year, Joan purchased a $1000 face value corporate... If you want to get a full essay, order it on our website: Orderessay

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