Clarke Enterprises’ bonds currently sell for $1,180, have an 11% coupon interest rate

finance

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Question 1

a. Clarke Enterprises’ bonds currently sell for $1,180, have an 11% coupon interest rate and

a $1000 par value, pay interest annually and have 18 year to maturity. Calculate the bonds’

yield to maturity (YTM). (8 marks)

b. Canute Industries has $1,000 par value bond with a 16% coupon interest rate outstanding.

The bond has 12 years remaining to its maturity date. If interest is paid semi-annually,

what is the value of the bond when the required rate of return is 14%? (7 marks)

c. Canton’s enterprises issued a bond with a par value often thousand dollars ($10 000.00)

with a coupon rate of 8%; Investors believed that 10% rate of return is reasonable on this

debt contract. The bond will mature in twenty (20) years’ time. James, an investor wants

to know how much this bond is worth today. (6 marks)

d. Assume that the same bond mention in part (c) above pays interest semi-annually what

price would you pay for the bond today? (6 marks)

e. Multi-product issues a bond with a coupon interest rate of 6% and a par-value of$1 000.00.

This bond will mature in twenty (20) years. The Daily Gleaner reported that this bond is

now selling for $1 124.63, what is the bond yield to maturity if you buy it at this price? 

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