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1.) Cherry Hill Inc. issued 30- year bonds during tough economic times. At the time of issue, the coupon rate was 14% but the current market rates are currently 6.5%. Luckily, the bonds were issued with a call feature. The bonds had a call protection period of 15 years and that was 9 years ago. The bond indenture allowed for the bondholder to be compensated for 1-year’s extra interest payment if the bonds were called. What is the current value of each bond if there was a face value of $1,000? (Assume semiannual compounding)

face value FV

coupon rate PMT

original issue RATE

years outstanding NPER

current price PV

2.) Harrington Inc. issued callable bonds 5 years ago. Each bond had a call protection period of 12 years with a call premium of one extra interest payment. The coupon rate on each bond was 16% and current rates are 7.2%. The face value of each bond is $2,000. What is the value of each bond? (Assume semiannual compounding)

face value FV

coupon rate PMT

original issue RATE

years outstanding NPER

current price PV

3.) A $5,000 bond is currently selling for $4,768. It was originally a 25-year bond issued 14 years ago with a coupon rate of 5.2%. What is the current yield to maturity? (Assume semiannual compounding)

face value FV

coupon rate PMT

original issue RATE

years outstanding NPER

current price PV

4.) The Altoona Company issued a 25-year bond 5 years ago with a face value of $1,000. The bond pays interest semiannually at a 10% annual rate.

** a.** What is the bond's price today if the interest rate on comparable new issues is 12%?

**b**. What is the price today if the interest rate is 8%?

** c**. Explain the results of parts a and b in terms of opportunities available to investors.

**d.** What is the price today if the interest rate is 10%?

**e.** Comment on the answer to part d.

5.) Calculate the market price (i.e PV) of a $1,000 face value bond under the following conditions.

** Coupon **** Rate ** **Time until maturity** **market rate** ** a**. 12% 15 yrs 10% ** b.** 7% 5 yrs 12% ** c. ** 9% 25 yrs 6% ** d. ** 14% 30 yrs 9% ** e. ** 5% 6 yrs 8%