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# Answer5 - Econ 102 Section 1 Homework#5 Due July 7 Tuesday...

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Econ 102 Section 1 Homework #5 Due July 7, Tuesday in class Multiple Choice Questions (1-10: 10x1=10 points; 11-55: 45 x 2=90 points) 1.The principal amount of a bond is the amount: A) originally lent. B) of interest agreed upon when the bond was originally issued. C) paid to the bondholders on a regular basis. D) of interest the bondholder is entitled to when the bond matures. E) the bondholder receives even if the borrower defaults on the loan. Answer: A Learning Objective: Principal amount Level of Learning: Knowledge Type: Word Problem Source: Unique 2.The coupon rate is the: 3.If the principal amount of a bond is \$2,000,000, the coupon rate is 6%, and the inflation rate is 4%, then the annual coupon payment made to the holder of the bond is _____. 4..James pays \$10,000 for a newly issued two-year government bond with a \$10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, James sells the bond. If the current one-year interest rate on government bonds is 7 percent, then the price he receives is: 5.A three-year bond with a principal amount of \$5,000, a 4% coupon rate paid annually, one year from maturity will sell for what price (rounded to the nearest dollar) in the bond market if interest rates are 5%? A) \$4,762 B) \$4,952 C) \$5,000 D) \$5,200 E) \$5,460 Answer: B Learning Objective: Bonds Level of Learning: Application Type: Word Problem Source: Unique 6.One year before maturity the price of a bond with a principal amount of \$1,000 and a coupon rate of 5% paid annually rose to \$1,019. The one year interest rate:

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Answer5 - Econ 102 Section 1 Homework#5 Due July 7 Tuesday...

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