1. What is the price of a 10-year bond that pay 6% coupon and the yield to maturity is 8%? Show equation and work.
a. $865.80
b. $929.76
c. $1,073.60
d. $932.90
e. $1,070.24
2. An 8-year bond paying 6% coupon is currently trading at $742.69 What yield is the market demanding at this price? Show equation and work.
a. 8%
b. 9%
c. 10%
d. 11%
e. 12%
3. JC Penny issued a 20-year zero-coupon bond and investors are expected to demand an 8% yield to maturity What Should be the price of the bond? Assume annual compounding. Show equation and work.
a. $311.80
b. $214.55
c. $148.64
e. $558.39
f. $463.19
4. Exxon issues a perpetual bond that promises to pay 7% interest per year. What is the price of a 1000 face value bond if the yield to maturity is 12%? Show equation and work.
a. $500.00
b. $583.33
c. $545.50
d. $600
e. $700
5. Deere Inc. issued 10-years bonds paying 6% coupons semi-annually. What should be the price of the bond if the market demands a 10% yield to maturity? Show equation and work.
a. $827.08
b. $828.81
c. $802.07
d. $803.64
f. $750.76
6. A 10-year bond paying 10% coupon semi-annually is selling for $1000. What is the yield demanded by investors? Show equation and work.
a. 12%
b. 6%
c. 11%
d. 5.50%
e. 10%
7. If the expected inflation rate is 6% and the real rate is 3%, what should be the nominal rate of a risk-free government bond? Show equation and work.
a. 8.12%
b. 9.18%
c. 9.14%
d. 10.21%
e. 8.07%