Chapter 4 Valuing Bonds Chemistry Worksheet With Answers Page 8
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21P/YR = 2
FV = 1,000
N = 18
I/YR = 10
PMT = 55
PV = ? = 1,057.59
DIF: E
REF: 4.2 Bond Prices and Interest Rates
28. A 10-year Treasury bond with par value of $1,000 has a 6% coupon rate and pays interest every six
months. The bond is three years old and has just made its sixth payment. The market now only
requires a 5% return on the bond. What is the expected price of the bond?
a. $802.03
b. $1,058.45
c. $1,077.95
d. $1,350.73
ANS: B
P/YR = 2
FV = 1,000
N = 14
I/YR = 5
PMT = 30
PV = ? = 1,058.45
DIF: M
REF: 4.2 Bond Prices and Interest Rates
29. A $1,000 par value bond that makes annual interest payments of $50 and matures in four years sells
for $980. What is the yield to maturity of the bond?
a. 5.57%
b. 2.47%
c. 4.54%
d. 2.04%
ANS: A
FV = 1,000
N = 4
PMT = 50
PV = ? = 980
I/YR = 5.57
DIF: M
REF: 4.2 Bond Prices and Interest Rates
30. Alexis Media issued five-year bonds one year ago with a 7.5% coupon that pays semi-annually (the
bonds just paid the second coupon payment). Alexis announced a revised advertising revenue forecast
that is quite bleak compared with the prevailing forecast at the time of the bond issuance. Investors
now require a 9% return on Alexis bonds. What is the percent change in price of the bonds associated
with the change in business conditions?
a. 4.95% decrease
b. 8.30% decrease
c. 29.06% decrease
d. 19.79% increase
e. Can’t determine with the information given
ANS: A
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