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Additional Exercises - Bonds

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18 views13 pages

Additional Exercises - Bonds

Uploaded by

stephanieverville23
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© © All Rights Reserved
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Additional Exercises – Bonds1 :

Note: All bonds presented in the exercises below are North American.

Simple Exercises :
1. The Aviron Company's bond has a coupon rate of 7%. It will mature in 8.5 years. If the current yield to
maturity is 6%, what is the current price of the bond?

2. The company Beatrix issued bonds at par exactly 4 years ago. At the time of issue, the bonds had a 15-year
maturity and a yield to maturity of 5%. Today, the yield to maturity is 100 basis points lower than the yield
to maturity at issuance. What is the current price of the bonds.

3. Cavallieri's bond is trading at a price of $973.00 and matures in 3 years. The current yield to maturity is 6.2%.
What is the coupon rate on this bond?

4. The current price of the Denver bond is $1015.67. It matures in 7 years and pays semi-annual coupons of
$30. What is the current yield to maturity of the Denver bond?

5. Exactly two years ago, Evanti issued bonds at par, with semi-annual coupons of $40 and a maturity of 10
years. Today, these bonds have a yield to maturity of 6.8%.

a. What is the current price of Evanti's bonds?


b. You purchased Evanti bonds when they were issued. You are now selling them at the price calculated in
(a). What is the return on your investment (EAR) ?

Evaluation exercises between two coupon dates:


6. On September 1, 2015, Farouch issued bonds with a coupon rate of 4% and a maturity of 10 years. The
current date is June 1, 2022. The current yield to maturity is 3.6%. What is the current price of Farouch's
bonds?

7. Five years and two months ago, Gamouch issued 15-year bonds with semi-annual coupon payments of $18.
If the current yield to maturity is 4.2%, what is the current price of the bonds?

8. On March 1st, 2020, Hilou issued bonds at par with a 10-year maturity and a coupon rate of 5%. Today,
October 1st, 2022, the yield to maturity on these bonds is 50 basis points lower than the yield to maturity at
the time of issuance. What is the current price of Hilou's bonds?

9. The $40 coupons on the Ilya bonds are paid on June 1 and December 1 of each year. The bonds will mature
on December 1, 2035. What will be the price of the bonds on July 1, 2025, if the yield to maturity on that
date is 8.5%?

10. This morning, the Julian Company issued bonds with a 10-year maturity and semi-annual coupon payments
of $14. What will the price of these bonds be in 4 years and 4 months, if the yield to maturity then is 3.2%?

1
Exercises written by Marie-Hélène Allard for the Basic Corporate Finance 10200A course, June 2022
Non-Conventional Bond Evaluation Exercises :
11. Two years ago, Kaminski issued a special bond. The bonds have a 15-year maturity and offer a coupon rate
of 4% for the first five years and a coupon rate of 5% for the remaining maturity. The face value is $1,000.
Given a current yield to maturity of 6%, what is the current price of the bonds?

12. Company Louka's bonds pay semi-annual coupons of $25 and mature in 8 years. Their face value is $1000.
Company officials announced this morning that they will not be able to pay the coupons due in 2 years, 2.5
years and 3 years respectively. All other coupons will be paid as agreed. If the yield to maturity is 7%, what
will be the price of the bond following this morning's announcement?

13. The Marain bond pays semi-annual coupons of $40 and matures in 8 years. Its face value is $1,000. If we
double the value of the coupons paid during the 4 th and 5th years, what would be the current price of the
bond? Consider a yield to maturity of 7.4%.

14. Nadjoie's bond pays semi-annual coupons of $14 and matures in 14 years. The unique feature of this bond is
that the $1,000 face value is distributed in two installments: $500 will be paid in exactly 5 years, and $500
will be paid at maturity. The yield to maturity is 3.2%. What is the price of the bond?

15. The Olive bond matures on July 1st, 2028. Coupons are paid on January 1 st and July 1st of each year. However,
the valut of the coupons differs depending on the date: January 1 st coupons are $20 and July 1 st coupons are
$50. The face value is $1000 and will be paid at maturity. Today is July 1 st, 2022. What is the current price of
the Olive bond if the yield to maturity is 8%?
Solution - Additional Exercises – Bonds :
Exercice 1:

Exercice 2:
Exercice 3:

Exercice 4:
Exercice 5:
Exercice 6:

Exercice 7:
Exercice 8:

Exercice 9:
Exercice 10:

Exercice 11:
Exercice 12:
Exercice 13:
Exercice 14:
Exercice 15:

OR (see next page)

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