BusM 201 Chapter 6 Practice Exam EZ Answer

# A 7 b 8 c 9 d 10 feedback mode end fv 1000 n

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Unformatted text preview: YTM on this bond? a. 7% b. 8% c. 9% d. 10% Feedback: Mode = End FV = 1,000 N = 10 I=? PMT = 0 PV = -508 10. You calculated duration of a bond which was 3.5. If the interest rate of the bond decreases by 1%, what happens to the price of the bond? a. Decrease by \$3.50 b. Decrease by 3.50% c. Increase by 3.50% d. Increase by \$3.50 e. There is no change in price 11. A 10-year bond is currently priced at \$956.84. It has the coupon rate of 6%, paid semi-annually and its face value is \$1,000. The discount rate of the bond is 7.64%. If the bond matures in 3 years, what is the duration of the bond? a. 2.25 years b. 2.78 years c. 4.51 years d. 5.57 years Feedback: Duration = ! !"# ! ! !! ! ! ! ! ! = !" ! ! !" ! ! !" ! ! !" ! ! !" ! ! !"#" ! ! ! (!!!.!"#\$)! (!!!.!"#\$)! (!!!.!"#\$)! (!!!.!"#\$)! (!!!.!"#\$)! (!!!.!"#\$)! ! !".!"!!!.!"!!".!"!!"#.!"!!"#.!"!!"#\$.!" !"#.!" = !"#.!" = 5.57 Since the duration just calculated is semi-annual duration, you dvide the duration by 2 to make it annual. Thus the answer is 2.78 years....
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## This note was uploaded on 01/11/2014 for the course FIN 201 taught by Professor Pinegar during the Fall '13 term at BYU.

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