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You read in The Wall Street Journal that 30-day T-bills are currently yielding 1%.
4. You read in The Wall Street Journal that 30-day T-bills are currently yielding 1%. Your brother-in-law, a broker at Kyoto Securities, has given you the following estimates of current interest rate premiums on a 10 year bond:
· Liquidity premium = 1%.
· Maturity risk premium = 1%.
· Default risk premium = 2%.
On the basis of these data, what is the long term corporate bond rate?
5. The Carter Company's bonds mature in 6 years have a par value of $1,000 and an annual coupon payment of $70. The yield to maturity for the bonds is 9%. What is the price of these bonds?
6. The Carter Company's bonds mature in 8 years have a par value of $1,000 and a semiannual coupon payment of $60. The yield to maturity for the bonds is 7%. What is the price of these bonds?
7. A corporate bond has a face value of $1,000, and 8 percent semiannual coupon. The bond matures in 8 years and sells at a price of $1,090. What is the bond's yield to maturity?
8. Consider the same bond in question 7. The bond can be called in 4 years at a call price of $1,040. What is the bond's yield to call?
