QUESTION

# 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:

·        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?