Bank 1 has assets composed solely of a 10-year, 12 percent coupon, $1 million loan with a 12 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $1 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 12 percent, zero-coupon bond with a current value of $894,006.20 and a maturity value of $1,976,362.88. It is financed with a 10-year, 8.275 percent coupon, $1,000,000 face value CD with a yield to maturity of 10 percent. All securities except the zero-coupon bond pay interest annually.  If interest rates rise by 1 percent (100 basis points), how do the values of the assets and liabilities of each bank change?

(b) Bluechip Company has TWO (2) bonds to evaluate and below are the information:- • Bond A has coupon rate of 10 percent and par value of RM1,000. The bond duration is 7 years with yield to maturity is 8 percent annually. • Bond B with coupon rate of 6 percent and yield to maturity is 10 percent. The maturity for bond is 5 years which paid semiannually. Evaluate the purchase price of both bonds and identify its relationship with the par value.

The LBJ Corporation issues a bond which has a coupon rate of 9.20%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is: O $101.75. O $102. $96.50 O$92

Assets, Incorporated, plans to issue $6 million of bonds with a coupon rate of 7.8 percent, a par value of $1,000, semiannual coupons, and 25 years to maturity. The current market interest rate on these bonds is 7.1 percent. In one year, the interest rate on the bonds will be either 9 percent or 5 percent with equal probability. Assume investors are risk-neutral. a. If the bonds are noncallable, what is the price of the bonds today?

MLK Bank has an asset portfolio that consists of $180 million of 15-year, 10.5 percent annual coupon, $1,000 bonds that sell at par. b-1. The duration of these bonds is 8.1702 years. What are the predicted bond prices in each of the four cases using the duration rule? (the cases being ± 0.10 percent and ± 2.00 percent)

Determine the price of a $1.3 million bond issue under each of the following independent assumptions: 1. Maturity 10 years, interest paid annually, stated rate 8%, effective (market) rate 10%. 2. Maturity 10 years, interest paid semiannually, stated rate 8%, effective (market) rate 10%. 3. Maturity 10 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 4. Maturity 20 years, interest paid semiannually, stated rate 10%, effective (market) rate 8%. 5. Maturity 20 years, interest paid semiannually, stated rate 10%, effective (market) rate 10%. Note: Use tables, Excel, or a financial calculator. (FV of S1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1.) Complete this question by entering your answers in the tabs below. Required 1 Required 3 Required 2 Required 4 Required 5 Maturity 10 years, interest paid annually, stated rate 8%, effective (market) rate 10%. Note: Round your answer to the nearest whole dollar. Price of bonds Required 2 > Next

ABC Inc. plans to issue $500,000 face value bonds with a stated interest rate of 12% and market interest rate of 10%.  They will mature in 10 years.  Interest will be paid semiannually.  At the date of issuance, compute the present value (bond issue price) of the future cash flows.  Following are appropriate factors from tables:

DIRECTIONS: Read and analyze the following problems and supply what is required and support it with necessary computations. 1. A company plans to issue a 25-year bond with a 12.5% interest rate, issued at a face value of P1, 000. The company is subject a 30% tax rate and expects a return on investment at 8%. Compute for the cost of debt issuance.

Suppose the Federal Reserve sells a $3000 bond, and the reserve ratio maintained by all private banks is 20%.  Assume that all loans are fully redeposited (zero “cash drains”) and that all deposits are checkable deposits. Determine the effect of the bond sale on total loans and deposits in the private banks. Explain in detail how these changes would occur. Illustrate the total result of the effects in part (1) using balance sheets for the consolidated private banks and the Federal Reserve, respectively. Discuss how the effects in part (1) would be different if: (i) the reserve ratio was 25% instead of 20%; (ii) a certain portion of loans were held as cash outside banks instead of being redeposited in the banks.

K (Related to Checkpoint 9.2 and Checkpoint 9.3) (Bond valuation relationships) The 13-year, $1,000 par value bonds of Waco Industries pay 7 percent interest annually. The market price of the bond is $855, and the market's required yield to maturity on a comparable-risk bond is 10 percent. a. Compute the bond's yield to maturity. b. Determine the value of the bond to you given the market's required yield to maturity on a comparable-risk bond. c. Should you purchase the bond? a. What is your yield to maturity on the Waco bonds given the current market price of the bonds? % (Round to two decimal places.)