Lecture 4- Ch 5 (bonds) In Class Problems

Lecture 4- Ch 5 (bonds) In Class Problems - Lecture 4: In...

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Lecture 4: In Class Problems (Ch.5 Bonds) Conceptual Questions 1. The coupon rate of a bond equals: A) its yield to maturity. B) a percentage of its price. C) the maturity value. D) a percentage of the par value. 2. When an investor purchases a $1,000 par value bond that was quoted at 97.50, the investor: A) receives 97.50% of the stated coupon payments. B) receives $975 upon the maturity date of the bond. C) pays 97.50% of face value for the bond. D) pays $1,025 for the bond. 3. What is the yield to maturity for a bond paying semi-annual interest totaling $100 per year, that has six years until maturity and sells for $1,000? A) 6.0% B) 8.5% C) 10.0% D) 12.5% 4. What happens to the coupon rate of a bond that pays $80 once a year in annual interest, if market interest rates change from 9% to 10%? A) The coupon rate increases to 10%. B) The coupon rate remains at 9%. C) The coupon rate remains at 8%. D) The coupon rate decreases to 8%.
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Lecture 4- Ch 5 (bonds) In Class Problems - Lecture 4: In...

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