# Pre-Flight - coupon rate payable semi-annually It is now 10...

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A bond's annual coupon is ____________. a. the coupon rate times the par value. b. the required rate times the par value. c. the coupon rate times the bond's value. d. the required rate times the bond's value. If a bond's required return falls, what will happen to its price? a. It will fall only if the bond sells at a premium. b. It will remain the same. c. It will rise. d. It will fall. A 10-year semi-annual coupon bond with an \$1000 par value pays an annual coupon rate of 6% and the market requires 8% APR. What is the appropriate coupon, time period, and discount rate respectively that needs to be used to correctly value this bond? Quirk Drugs sold an issue of 30-year \$1,000 par value bonds to the public that carry a 10.85%

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Unformatted text preview: coupon rate, payable semi-annually. It is now 10 years later and the current market rate of interest is 9.00%. If interest rates remain at 9.00% until Quirk's bonds mature, what will happen to the value of the bonds over time? WRONG a. The bonds will sell at a premium and decline in value until maturity. b. The bonds will sell at a discount and rise in value until maturity. c. The bonds will sell at a premium and rise in value until maturity. d. The bonds will sell at a discount and fall in value until maturity. Which of the following bonds would have the most re-investment rate risk? a. A 10-year, 10% coupon bond. b. A 10-year, zero coupon bond. c. A 20-year, 10% coupon bond. d. A 20-year zero coupon bond....
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## This note was uploaded on 05/05/2010 for the course ECONMOICS ECON 203 taught by Professor Josephpetry during the Spring '10 term at University of Illinois, Urbana Champaign.

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Pre-Flight - coupon rate payable semi-annually It is now 10...

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