Chapter 4 Valuing Bonds Chemistry Worksheet With Answers Page 4
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
2113. Bavarian Sausage wants to issue a 10 year coupon bond. The face value of the bond is $1,000 and the
bond makes semiannual coupon payments. Outstanding Bavarian Sausage 8% bonds with a remaining
maturity of 10 years are currently trading at $1,145. These bonds also have a face value of $1,000 and
make semiannual payments. If Bavarian Sausage wants the new bonds to sell at par, what should be
the coupon rate on these bonds?
a. 8.00%
b. 6.05%
c. 7.25%
d. 9.35%
ANS: B
FV: 1000
PV: 1145
PMT: 80/2
N: 10/2
I/Y: 3.025
coupon rate = 3.025*2 = 6.05
DIF: H
REF: 4.2 Bond Prices and Interest Rates
14. You just bought a bond with a yield to maturity of 9.5%. If the rate of inflation is expected to be 4%,
what is the real return on your investment?
a. 9.50%
b. 5.29%
c. 4.00%
d. Not enough information.
ANS: B
r = 1.095/1.04 - 1 = .0529
DIF: E
REF: 4.2 Bond Prices and Interest Rates
15. What is the value of a 15 year 10% coupon bond with a face value of $1,000. The required return on
the bond is 12% and the bond makes semiannual payments.
a. $862.35
b. $1,167.39
c. $925.76
d. $1,000
ANS: A
FV: 1000
PMT: 100/2
I/Y: 12/2
N: 15*2
PV: 862.35
DIF: E
REF: 4.2 Bond Prices and Interest Rates
16. You are offered a zero-coupon bond with a $1,000 face value and 5 years left to maturity. If the
required return on the bond is 8%, what is the most you should pay for this bond?
a. $752.69
b. $680.58
c. $1,000
d. $1,126.94
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Education