Question

16) Yest Corporation's bonds have a 15-year maturity, a 7% semiannual coupon, and a par value of $1,000. The going interest rate (r_d) is 6%, based on semiannual compounding. What is the bond’s price?

Question 16 options:

	$1,008.65
	$1,051.34
	$1,024.67
	$1,098.00
	$1,105.78

17) Bond rating is a measure of interest rate risk

Question 17 options:

	True
	False

18) The fisher effect expresses the relationship between coupon rate and yield.

Question 18 options:

	True
	False

19) Stockholders have voting rights, and creditors do not have voting rights

Question 19 options:

	True
	False

20) Municipal bonds do not need to pay federal income tax

Question 20 options:

	True
	False

Answer 1

16)

price of coupon = Coupon payment per period * [1-(1+i)^-n]/i + par value/(1+i)^n

i = interest rate per period

n = number of periods

Price = (70/2) * [1-(1+0.06/2)^-30]/(0.06/2) + 1000/(1+0.06/2)^30

= 1098.00

17)

False, Its a measure of creditworthiness of issuing firm

18)

False, it express the relationship between real return, nominal return and inflation rate

19)

True, Debt does not have any voting rights

20)

True, they are exempt from federal income tax