What is the bond’s current market price?

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Nov 18, 2022

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In 250 words answer Explain what the yield curve is, what determines its shape, and how you can use the yield curve to help forecast future interest rates.
Explain the different types of risk that bond investors and issuers face. Might there be more than four?
submit your answers to written questions and calculated answers to problems on an Excel spreadsheet using formulas for your calculations. 6-3 Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. Should you borrow on a long-term or a short- term basis? Why
6-10 Suppose you have noticed that the slope of the corporate yield curve has become steeper over the past few months. What factors might explain the change in the slope?
7-1 BOND VALUATION Madsen Motors’s bonds have 23 years remaining to maturity. Interest is paid annually; they have a $1,000 par value; the coupon interest rate is 9%; and the yield to maturity is 11%. What is the bond’s current market price?
7-2 YIELD TO MATURITY AND FUTURE PRICE A bond has a $1,000 par value, 12 years to maturity, and an 8% annual coupon and sells for $980.
a. What is its yield to maturity (YTM)? b. Assume that the yield to maturity remains constant for the next three years. What will
the price be 3 years from today?
7-3 BOND VALUATION Nesmith Corporation’s outstanding bonds have a $1,000 par value, an 8% semiannual coupon, 14 years to maturity, and an 11% YTM. What is the bond’s price?
7-3 (a) The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that statement true or false? Explain. (Hint: Make up a “reasonable” example based on a 1-year and a 20-year bond to help answer the question.
7-14 Would the yield spread on a corporate bond over a Treasury bond with the same maturity tend to become wider or narrower if the economy appeared to be heading toward a recession? Would the change in the spread for a given company be affected by the firm’s credit strength? Explain.

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