financequiz5 - 1. Question: The Carter Company's bonds...

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1. Question: The Carter Company's bonds mature in 10 years have a par value of $1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds?
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Your Answer: $935 .82 C ORR ECT $941 .51 $958 .15 $964 .41 $979 .53
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Instructor Explanation: On a financial calculator, enter: N 10; I/YR 9; PMT 80; FV 1,000; PV PV = $935.82 Alternatively, using the bond formula: VB = COUPON [{1 – 1 / (1 + iN}} / i] + FV / (1 + i)N VB = $80 [{1 – (1 / (1 + .09)10) }/ .09 ] + $1,000 / (1 + .09)10 VB = $80 * 6.4177 + $422.41 VB = $513.34 + $422.41 = $935.83 Points Received: 4 of 4 Comments: 2. Question: Ken Williams Ventures' recently issued bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 8%, at what price should the bonds sell?
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Your Answer: $801 .80 $814 .74 $828 .81 C ORR ECT $830 .53 $847 .86
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Explanation: Coupon Rate 6% PMT $60 calculated N 15 I/YR 8% PV $828.81 FV $1000.00 Points Received: 4 of 4 Comments: 3. Question: Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5%. Long-term risk-free government bonds were yielding 8.7% at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long- term government bonds are currently yielding 7.8%, then at what rate should
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financequiz5 - 1. Question: The Carter Company's bonds...

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