Chapter 4 Valuing Bonds Chemistry Worksheet With Answers Page 17
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21DIF: M
REF: 4.3 Types of Bonds
65. A bond is trading on the secondary market and will mature in 10 years. The bond has a face value of
$1,000 that will be paid at maturity. Further, the bond pays an annual coupon at 9% of face value.
What should the trading price be for the bond if investors seek a 12% on their investment?
a. $1,192.53
b. $830.49
c. $827.95
d. $508.52
ANS: B
n = 10, r = 12%, PV = ?, PMT = 9%*1000, FV = $1,000
PV = $830.49
DIF: E
REF: 4.2 Bond Prices and Interest Rates
66. Which type of bond has the highest daily trading volume in our economy?
a. Treasury bonds
b. Agency bonds
c. Corporate bonds
d. Municipal bonds
ANS: A
DIF: E
REF: 4.3 Types of Bonds
67. A bond currently trades at $975 on the secondary market. The bond has 10 years until maturity and
pays an annual coupon at 9% of face value. The face value of the bond is $1,000. What is the yield
to maturity for this bond?
a. 8.86%
b. 9.00%
c. 9.23%
d. 9.40%
ANS: D
n = 10, r = YTM=?, PV = -$975, PMT = $90, FV = $1,000
r = 9.40%
DIF: E
REF: 4.4 Bond Markets
68. A bond currently trades at $980 on the secondary market. The bond has 10 years until maturity and
pays a semi-annual coupon at 9% APR of face value. The face value of the bond is $1,000. What is
the yield to maturity for this bond?
a. 9.00%
b. 9.18%
c. 9.25%
d. 9.31%
ANS: D
n’ = 20, r’= YTM/2, PV = -$980, PMT = 9%*1000/2, FV = $1,000
r’ = 4.656%
YTM = 4.656% * 2 = 9.31%
DIF: H
REF: 4.4 Bond Markets
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