270 Chapter 6 Investments
- A government bond with 12 years to maturity carries a coupon rate of 6%. Similar government bonds with the same
remaining term sell on the open market with a 7.1% interest rate. Would you expect this bond to sell at a premium or
at a discount? - A $10,000 par value bond is sold for $9,765.19. Did the bond sell at a premium or at a discount? Find the amount of
the premium or discount.
B. Current Yield and Bond Tables
- A $1,000 par value bond is sold for $1,056.17. The coupon rate is 8^1 ⁄ 8 %. What is the current yield?
- An investor purchased a bond for $4,875.35. The par value is $5,000, and the coupon rate is 6^3 ⁄ 4 %. Find the current
yield. - Jordan bought a $1,000 par value bond with a 9% coupon rate. She paid a premium of $182.15 for the bond. What is
the current yield on this investment? - A $1,000 par value bond is sold at a $45.36 discount. The coupon rate is 5.75%. What is the current yield?
- Suppose that you are interested in the bond whose current market quote is given in the table below:
CORPORATE BONDSCompany Coupon MaturityCurrent
Yield$ Volume
(000s) Last PriceRalyd
Pharmaceuticals7.750 8/15/14 8.214 2,171 94.352
a. Suppose the par value of this bond is $1,000. How much would you pay if you bought one of these bonds at the
price listed in the table?
b. What is the semiannual coupon payment for one of these bonds?
c. Does this bond sell at a premium or at a discount? What is the amount of the premium or discount?
d. If you buy 20 of these bonds, how much would you have invested? How much would you receive in each
semiannual interest payment? How much would you receive when the bond is redeemed?- Suppose you are considering investing some money in government bonds. You look up a rate quote on your broker’s
Web site, and get the following quote:
UNITED STATES TREASURY BONDS
Par Value Coupon MaturityCurrent
Yield$ Volume
(000s) Last Price$10,000 6.250 10/31/12 275,998 103.516