E305 Chapter 4 Quiz (Pearson)

E305 Chapter 4 Quiz (Pearson) - E305 Chapter 4 Quiz(Pearson...

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E305 Chapter 4 Quiz (Pearson) 1. You receive a check for $100 two years from today. The discounted present value of this $100 is: $100/(1+i) 2 2. Why do current prices on previously issued bonds offered for resale change when the market interest rate changes? Because new bonds are always preferred to old bonds. Because no buyer of bonds today will accept a lower yield to maturity than the market rate, and no buyer will be  able to get a higher yield. Because the marketplace does not provide enough information to price bonds accurately. Because old bonds cannot sell at face value today. Because no buyer of bonds today will accept a lower yield to maturity than the market rate, and no buyer will be able to get a higher yield. 3. If a bond sells at a premium, where price exceeds face value, then we would expect to see: market interest rates above the coupon rate. market interest rates below the coupon rate. market interest rate the same as the coupon rate. market interest rates could be the same, higher, or lower than the coupon rate.
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