Question

Thank You

1) If the expected path of one-year interest rates over the next five years is 1.5%, 2%, 2.5%, 3%, and 3.5%, then the pure expectations theory predicts that today's interest rate on the five-year bond is (approximately):

2.35%

2.94%

2.50%

3.25%

None of the above.

2) U.S. government notes mature in 5 years, have a par value of $1,000, and have an annual coupon rate of 3.5% (paid on a semi-annual basis). The current market interest rate for comparable bonds is 2.55% (annual). Approximately, what is the bond price (report answer as a positive number)?

$919.23

$897.79

$1,011.60

$1,044.33

None of the above.

3) Viking Inc. has outstanding bonds currently trading at $956.40 with par value of $1,000. The bonds mature in 15 years and have YTM (yield-to-maturity) of 6.25%. If Viking bonds pay coupon interest on a quarterly basis, what is the annual coupon amount (in dollars)?

Group of answer choices

$14.50

$13.79

$58.00

$29.00

None of the above.

Answer 1