Question

1. A 12-year semiannual bond with a coupon rate of 6% has a face value of $1,000 and a YTM of 7%. The price of the bond is

A. 912.85. B. 914.25. C. 916.36. D. 919.71 E. 920.57

2. A 4-year discount bond with a face value of $1,000 sells at $915. The YTM of the bond is

A. 2.24%. B. 2.52% C. 2.83% D. 3.21% E. 3.48%

3. A 7-year semiannual bond with a face value of $1,000 and a coupon rate of 8% sells at $974. The YTM of the bond is

A. 4.3% B. 5.5% C. 6.5% D. 7.2% E. 8.5%

4. Consider a 20-year semiannual bond with a face value of $1,000, coupon rate of 6.5% and a market price of $1,014.72. The bond is callable in 4 years at the price of $1,050. The yield to call of this bond is

A. 6.4% B. 6.8% C. 7.2% D. 7.6% E. 8.2%

5. Consider a bond with a YTM of 5.5% that sells at $970. If the yield falls to 5% the bond’s new price will be $1,004. The duration of this bond is

A. 5.5 years B. 6.2 years C. 6.9 years D. 7.4 years E. 7.8 years

6. A pension plan is obligated to make disbursements of $3 million in 2 years, $5 million in 3 years, $7 million in 4 years, and $8 million in 5 years. Find the duration of this plan’s obligations if the interest rate is 6%.

A. 2.5 years B. 3.2 years C. 3.6 years D. 3.8 years E. 4.3 years

7. Consider a 15-year semiannual bond with a 5% coupon rate. What is the bond’s duration if its YTM is 4.5%?

A. 9.7 years B. 10.9 years C. 11.5 years D. 12.1 years E. 12.6 years

Answer 1

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