1. Camellia Corporation issued a 5% bond four years ago at par value. The market interest rate on comparable bonds today is 4%.
A) This bond sells at a premium and the coupon rate is lower than the yield.
B) This bond sells at a discount and the coupon rate is higher than the yield.
C) This bond sells at a premium and the coupon rate is higher than the yield.
D) This bond sells at a discount and the coupon rate is lower than the yield.
2. A bond quoted at a price of 95% of its par value
A) has a market yield that exceeds the coupon.
B) is a premium bond.
C) yields 9.5%.
D) yields 5%.
3. Consider the following project:
Y0 Y1 Y2 Y3 Y4 Y5 Y6 Y7
CF $0 –$100 $50 $80 $30 $30 $30 –$60
a) What is the IRR?
b) What is the payback time?