Question

1. A bond that yields 6% pays a coupon of $30 semi-annually. Which of the following is most likely the price of the bond?

   		$990
   		$1000
   		$1050
   		Not enough information to determine.

5 points   

QUESTION 2

1. Investors with very high tax rates usually prefer municipal bonds because of the tax benefit.

   True

   False

5 points   

QUESTION 3

1. A bond that sells for greater than $1000 when yields are 10% must have an annual coupon that is greater than $100.

   True

   False

5 points   

QUESTION 4

1. A bond that sells for less than $1000 when yields are 10% must have an annual coupon that is less than $50.

   True

   False

5 points   

QUESTION 5

1. A bond that yields 8% pays a coupon of $60 semi-annually. Which of the following is most likely the price of the bond?

   		$990
   		$1000
   		$1050
   		Not enough information to determine.

5 points   

QUESTION 6

1. A bond that yields 5% pays a coupon of $30 semi-annually. Which of the following is most likely the price of the bond?

please come with formula. thanks

Answer 1

1)
Yearly Yield = 6%
Therefore, semi annually yield = 3%
The coupon payment is $30 semi annually.
Let the price of the bond be Z.
Therefore, Z × 0.03 =30
Solving this we get Z = $1000

2)
True
Investors with high tax rate usually prefer municipal bonds because of the tax benefit.
Under the Income Tax Act, the tax is exempted.

3)
True.
The coupon rate is 10%
So the annual coupon must be more than $100 as bond is for more than 1000.

4)
False.
Again the coupon rate is 10%. So the annual coupon must be of $100

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