1. What is the annual coupon payment for a bond (par value of $1,000) with 7 years until maturity, a price of $1,000, and a discount rate of 6%?
a) $80
b) $70
c) $60
d) $50
e) None of the above
2. What happens to the price of a three-year bond with an 8% coupon when interest rates change from 6% to 8%?
a) A price increase of $53.47
b) A price decrease of $51.54
c) A price decrease of $53.47
d) No change in price
e) None of the above
3. What is the rate of return for an investor who pays $1,000 for a three-year bond with a 7% coupon rate and sells the bond one year later for $1,000?
a) 5%
b) 6%
c) 7%
d) 8%
e) none of the above