Chapter 4 Valuing Bonds Chemistry Worksheet With Answers Page 10
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21a. equals its annual coupon payment divided by the bonds’ current market price.
b. varies during the life of the bond.
c.
equals its annual coupon payment divided by its par value.
d.
both a and b are correct.
ANS: C
DIF: M
REF: 4.2 Bond Prices and Interest Rates
36. WeOweYou, Inc. has a 12 year bond outstanding that makes 9.5% annual coupon payments. If the
appropriate discount rate for such a bond is 7%, what the the appropriate price for the bond?
a. $1,200.73
b. $1,000.00
c. $1,198.57
d. $754.56
ANS: C
-12
-12
95 ( (1/.07) - ((1/.07) (1.07)
) ) + 1,000 (1.07)
= 1,198.57
DIF: M
REF: 4.2 Bond Prices and Interest Rates
37. WeOweEveryone, Inc. has a 12 year bond outstanding that has 9.5% coupon rate. If the appropriate
discount rate for such a bond is 7%, what the the appropriate price for the semi-annual coupon paying
bond?
a. $1,200.73
b. $1,198.57
c. $1,000.00
d. $762.77
ANS: A
-24
-24
47.50 ( (1/.035) - ((1/.035)
(1.035)
) ) + 1,000 (1.035)
= 1,200.73
DIF: M
REF: 4.2 Bond Prices and Interest Rates
38. Astro Investors is interested in purchasing the bonds of the Jetson Company. Jetson’s bonds are
currently priced at $1,100.00 and have 14.5 years to maturity. If the bonds have a 6% coupon rate
what is the yield-to-maturity of these semi-annual coupon paying bonds?
a. 5.00%
b. 5.02%
c. 2.51%
d. 2.50%
ANS: B
-29
-29
30 ( (1/y) - ((1/.y)
(1+ y)
) ) + 1,000 (1 + y)
= 1,100.00
y = .0251 ====> 2
y = 5.02%
DIF: H
REF: 4.2 Bond Prices and Interest Rates
39. Elroy Investors is interested in purchasing the bonds of the Judy Company. Judy’s bonds are
currently priced at $1,100.00 and have 14 years to maturity. If the bonds have a 6% coupon rate what
is the yield-to-maturity of these annual coupon paying bonds?
a. 5.00%
b. 4.99%
c. 2.50%
none of the above.
d.
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