Chapter 4 Valuing Bonds Chemistry Worksheet With Answers Page 18
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2169. 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
coupon yield for this bond?
a. 8.86%
b. 9.00%
c. 9.23%
d. 9.40%
ANS: C
$90/$975 = 9.23%
DIF: E
REF: 4.4 Bond Markets
NARRBEGIN: Exhibit 4-1
Exhibit 4-1
In the financial section of your local paper, you see the following bond quotation:
Company
RATE
MATURITY
BID
ASK
CHG
ASK
MO/YR
YLD
BIG CITY
7.00%
Aug 12
104:07
104:08
2
?????
NARREND
70. Given Exhibit 4-1, what is the current ask yield of the Big City bond? Assume that today’s date is
August, 2004.
a. 6.14%
b. 6.31%
c. 6.58%
d. 6.73%
ANS: B
N = 8, r = ?, PV = -$1042.50, PMT = $70, FV = $1,000
r’ = 6.31%
DIF: H
REF: 4.4 Bond Markets
NAR: Exhibit 4-1
71. Given Exhibit 4-1, what is the current coupon yield of the Big City bond? Assume that today’s date is
August, 2004.
a. 6.14%
b. 6.34%
c. 6.58%
d. 6.71%
ANS: D
$70/$1042.50
DIF: H
REF: 4.4 Bond Markets
NAR: Exhibit 4-1
72. What is the minimum rating required for a bond to be considered investment grade?
a. AA
b. A
c. BBB
d. BB
ANS: C
DIF: E
REF: 4.4 Bond Markets
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