Question

1. A bond's par value can also be called its

coupon payment.

present value.

market value.

face value.

2.Horizon offers a 12 percent coupon bond with semiannual payments and a yield to maturity of 10 percent. The bonds mature in 16 years. What is the market price per bond if the face value is $1,000?

$808

$911

$1,000

$1,158

Answer 1

HI

Bond par value is the amount that the investor receives at the end of term with coupon payment.

It is also known as face value. Hence face value is correct answer.

2) Here bond price = (C/r)*(1-(1+r)^t) + F*(1+r)^-t

Face value F = $1000

semiannual coupon C = 1000*12%/2 = $60

semiannual rate r = 10%/2 = 5%

time t in semiannual = 16*2 = 32

So Price of bond = (60/5%)*(1-1.05^-32) + 1000*1.05^-32

= 1200*0.79 + 209.87

=948.16 + 209.87

= $1158.03

Hence last option is correct here

Thanks