optionals - chap 7

Optionals chap 7 - 7 1 A semiannual corporate bond has a face value of $1,000 a yield to maturity of 7.2 percent and a coupon rate of 7.5 percent

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Unformatted text preview: 7 ________ 1. A semiannual corporate bond has a face value of $1,000, a yield to maturity of 7.2 percent, and a coupon rate of 7.5 percent. The bond matures 10 years from today. This bond: a. pays interest payments of $75.00 every six months. b. sells at par value. c. is currently quoted at a price of 101.02. d. has a current yield of 7.34 percent. ________ 2. An investor is considering two bonds, a 5.5 percent municipal bond versus a 7.5 percent taxable bond. If the investor is in the 30 percent tax bracket, which bond should she chose? Why? Ignore state and local taxes. a. the taxable bond; it has a higher aftertax yield b. the taxable bond, it has a lower aftertax yield c. the municipal bond; it is exempt from all taxes d. the municipal bond, it has a higher aftertax yield ________ 3. TES, Inc. offers an 8.5 percent bond with a yield to maturity of 7.65 percent. The bond pays interest annually and matures in 22 years. What is the market price of one of these bonds if the face value is $1,000?and matures in 22 years....
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This note was uploaded on 06/27/2008 for the course FINC 450 taught by Professor Ddavidson during the Spring '08 term at Loyola Chicago.

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Optionals chap 7 - 7 1 A semiannual corporate bond has a face value of $1,000 a yield to maturity of 7.2 percent and a coupon rate of 7.5 percent

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