Business Finance Exam 3 Solution
Spring2009
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1
The Carter Company's bonds mature in 10 years, have a par value of
$1,000 and a coupon rate of 11%.
The market interest rate for the
bonds is 9%.
What is the price of these bonds?
a. $935.82
b. $941.51
c. $958.15
d. $1,128.35 *
e. $1,280.94
2.
Brown Enterprises’ bonds currently sell for $1,025.
They have a 9-year
maturity, an annual coupon of $90, and a par value of $1,000.
What is
their yield to maturity?
a. 7.61%
b. 8.59%
*
c. 9.00%
d. 9.10%
e. 9.20%
3.
Leggio Corporation issued 20-year, 7% annual coupon bonds at their par
value of $1,000 one year ago.
Today, the market interest rate on these
bonds has dropped to 5%.
What is the price of the bonds today?
a. $1,046.59
b. $1,111.58
c. $1,133.40
d. $1,177.78
e. $1,241.71
*
4.
Yest Corporation's bonds have a 15-year maturity, a 7% semiannual
coupon, and a par value of $1,000.
The going interest rate is 6%,
based on semiannual compounding.
What is the bond’s price?
a. $1,008.65
b. $1,024.67
c. $1,051.34
d. $1,098.00
*
e. $1,105.78
5.
A 20-year, $1,000 par value bond has a 9% annual coupon.
The bond
currently sells for $925.
If the yield to maturity remains at its
current rate, what will the price after 6 years?
a. $933.09
b. $935.22
*
c. $961.82
d. $965.84
e. $978.40
6.
Moussawi Ltd's outstanding bonds have a $1,000 par value, and they
mature in 5 years.
Their yield to maturity is 9%, based on semiannual
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