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A High-Yield Bond Has the Following Terms

question 21

Essay

A high-yield bond has the following terms:
      Principal amount         $1,000
      Annual interest paid       $100
      Maturity                     10 years

a. What is the bond's price if comparable debt yields 12 percent?

b. What would be the price if comparable debt yields 12 percent and the bond matures after five years?

c. What are the current yields and yields to maturity in a and b?

d. What would be the bond's price in a and b if interest rates declined to 9 percent?

e. What are the current yield and yield to maturity in d?

f. What two generalizations may be drawn from the above price changes?


Definitions:

IUPAC Name

The recommended naming of chemical compounds according to the guidelines set by the International Union of Pure and Applied Chemistry.

Fischer Projection

A method for depicting three-dimensional organic molecules in two dimensions using vertical lines for groups going back and horizontal lines for groups coming forward.

2-Bromopentan-1,3-Diol

An organic compound featuring a five-carbon chain with a bromine atom and two hydroxyl groups located at the first and third carbon atoms, respectively.

IUPAC Name

Naming chemical compounds systematically based on the guidelines set by the International Union of Pure and Applied Chemistry.

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