Question 1

A 10-year $5000 bond redeemable at par,is purchased by Ms.Gates that pays coupons at j2 = 6%.She purchases the bond for $3753.78 to yield j2 = 10%.She then immediately sells all of the coupons to another investor at a price of $2038.55.What rate of return,j2 does Ms.Gates earn on her investment?

Accepted Answer

A) 11.29% 
B) 10.99% 
C) 10.00% 
D) 8.00%

Question 2

A $20,000 bond is redeemable at 105 in 15 years and pays bond interest at j2 = 12%.The purchase price is $22,200 based on a yield rate of j2 = x%.Determine × using the method of averages.

Accepted Answer

A) 5.34% 
B) 10.68% 
C) 10.74% 
D) 11.48%

Question 3

The market (or clean)price of a bond on June 15,2010 is 102.75.The accrued interest on this date is $10.27.If an investor wishes to purchase $1200 worth of this bond,what is the full (or dirty)price?

Accepted Answer

A) $1017.23 
B) $1037.77 
C) $1222.73 
D) $1243.27

Question 4

The ABC Corporation issues a 20-year $1000 par value bond with bond interest at j2 = 6%.The bond is callable as early as the end of 10 year at $1100.The price of the bond to yield j2 = 5% is
• $1125.51 assuming the bond is held to maturity.
• $1138.97 assuming the bond is called at the end of 10 years.
In which of the following situations would the actual yield rate more than 5%?
(i)An investor pays $1138.97 for the bond and it is held to maturity;
(ii)An investor pays $1125.51 for the bond and it is called at the end of 15 years.

Accepted Answer

A) (i)only 
B) (ii)only 
C) Both (i)and (ii) 
D) Neither (i)or (ii)

Question 5

A bond,paying semi-annual coupons of $60 is purchased to yield j2 = 13%.The absolute value of the write up (book value adjustment)in the 6th coupon period is $5.81.What is the interest on the book value for the 11th coupon,I11?

Accepted Answer

A) $67.96 
B) $64.24 
C) $55.76 
D) $52.04

Question 6

A $10,000 bond pays semi-annual coupons at j2 = 7% every March 2 and September 2.The bond is redeemable at par and is purchased between coupon dates on May 15,2010 to yield j2 = 6.5%.At the time of purchase there are 10 coupons remaining to be paid,plus the redemption value.What is the full (or dirty)price of the bond on May 15,2010?

Accepted Answer

A) $10,352.81 
B) $10,342.74 
C) $10,210.56 
D) $10,201.98

Question 7

A $1000 bond with semi-annual coupons at j2 = 6% (Feb.1 and Aug.1 of every year)is sold for $980 on August 1,2007.It is bought for $920 on February 1,2000.Using the method of averages,what is the yield rate,j2?

Accepted Answer

A) 5.47% 
B) 5.53% 
C) 7.11% 
D) 7.16%

Question 8

Which of the following statements is true about an inverted yield curve?

Accepted Answer

A) Long term interest rates are less than short term interest rates and the market is expecting future interest rates to rise 
B) Long term interest rates are less than short term interest rates and the market is expecting future interest rates to fall 
C) Long term interest rates are greater than short term interest rates and the market is expecting future interest rates to rise 
D) Long term interest rates are greater than short term interest rates and the market is expecting future interest rates to fall

Question 9

Which of the following statements is (are)true?
(I)A bond has level coupons payable at j2 = 5% and is redeemable C)at par.If this bond is purchased at a price (P)based on j2 = 6.5%,then P > C.(II)The full (or dirty)price of a bond is always greater than the market (or clean)price of the bond.

Accepted Answer

A) Both of them 
B) I only 
C) II only 
D) Neither of them

Question 10

A $1000 bond paying coupons at j2 = 11% is redeemable at par on November 29,2013.When it is purchased on October 5,2010,the quoted price is Q = $ 1141.59 to yield j2 = 6%.What is the full (or dirty)price on October 5,2010?

Accepted Answer

A) $1103.03 
B) $1125.15 
C) $1158.03 
D) $1180.15

Question 11

A $1000 bond with a redemption date of February 1,2024 is purchased on October 7,2010.The quoted price,q,is 104.25.The bond is redeemable at par and pays interest at j2 = 11%.What is the purchase price (full or dirty price)of the bond?

Accepted Answer

A) $1022.47 
B) $1042.50 
C) $1060.83 
D) $1062.53

Question 12

A $1000 bond has semi-annual coupons at j2= 10%.It is redeemable at par in n-years (n > 5).The bond is callable in 5 years at par.The price of the bond to yield j2 = 8%,assuming the bond is held to maturity,is $1172.92.Which of the following is the correct answer?

Accepted Answer

A) Investor would not be willing to pay $1172.92 because if the bond is called in 5 years,they will earn less than j2 = 8%. 
B) Investor would not be willing to pay $1172.92 because if the bond is held to maturity,they will earn less than j2 = 8%. 
C) Investor would be willing to pay $1172.92 because if the bond is called in 5 years,they will earn exactly j2 = 8%. 
D) Investor would be willing to pay $1172.92 because if the bond is called in 5 years,they will earn more than j2 = 8%.

Question 13

For each of the following 3 bonds,the yield rate is the same.The face value is $1000 in each case.
I.Redeemable at par in 10 years,annual coupons at 8%,sells at a premium.
II.Redeemable at par in 10 years,annual coupons at 6%,sells at a premium.
III.Redeemable at par in 20 years,annual coupons at 6%,sells at a premium.
Which of the following statements regarding the prices of these bonds is true?

Accepted Answer

A) II > I,III > II 
B) I > II,III > II 
C) I > II,II > III 
D) II > I,II > III

Question 14

A $100 bond with semi-annual coupons,redeemable at 105 in 8 years,can be purchased at a discount of $18.19 to yield j2 = 12%.What is the bond coupon rate,j2?

Accepted Answer

A) 8.0% 
B) 9.0% 
C) 15.2% 
D) 16.2%

Question 15

A $1000 bond with semi-annual coupons at j2 = 8% is redeemable at 99 in 10 years.It is callable at 105 in 5 years.Determine the highest purchase price to guarantee a yield of at least j2 = 7%.

Accepted Answer

A) $1086.42 
B) $1077.03 
C) $1071.06 
D) $1066.04

Question 16

A $10,000 six-year accumulation bond (compound interest bond)with a coupon rate of j2 = 4% is purchased for $9,541.62.The pricing yield rate is at j2 = 5%.Determine the redemption value of this bond (nearest dollar).

Accepted Answer

A) $9,419 
B) $10,391 
C) $10,073 
D) $10,150

Question 17

A bond is purchased at a premium and the price is calculated assuming a yield of j2 = 11%.You are given that the semi-annual coupon payment is $65 and that the book value adjustment portion of the 1st coupon is $7.65.What is the price of the bond?

Accepted Answer

A) $1320.91 
B) $1181.82 
C) $1042.73 
D) $1007.65

Question 18

A 3-year bond pays level semi-annual coupons and is bought to yield j2 = 15%.The interest portion of the first coupon is $57.40.The amount of the write-up in the book value of the bond at the time of the last coupon payment is $46.51.What is the coupon paid each period?

Accepted Answer

A) $25.00 
B) $27.26 
C) $87.54 
D) $89.80

Question 19

A $5000 bond with interest at j2 = 10% is redeemable at 98 in 10 years.It is purchased at a pricing yield rate of j2 = x% and the resultant price is $5080.Using the method of averages,determine x

Accepted Answer

A) 10.38% 
B) 9.66% 
C) 5.19% 
D) 4.83%

Question 20

A $2000 bond is redeemable at 102 in 6 years.The absolute value of the sum of the write downs (book value adjustment column)is $53.42.What is the price of the bond?

Accepted Answer

A) $2093.42 
B) $2053.42 
C) $1986.58 
D) $1946.58

Exam 6: Bonds

A $20,000 bond is redeemable at 105 in 15 years and pays bond interest at j₂ = 12%.The purchase price is $22,200 based on a yield rate of j₂ = x%.Determine × using the method of averages.

The market (or clean) price of a bond on June 15,2010 is 102.75.The accrued interest on this date is $10.27.If an investor wishes to purchase $1200 worth of this bond,what is the full (or dirty) price?

A bond,paying semi-annual coupons of $60 is purchased to yield j₂ = 13%.The absolute value of the write up (book value adjustment) in the 6^th coupon period is $5.81.What is the interest on the book value for the 11^th coupon,I₁₁?

A $1000 bond with semi-annual coupons at j₂ = 6% (Feb.1 and Aug.1 of every year) is sold for $980 on August 1,2007.It is bought for $920 on February 1,2000.Using the method of averages,what is the yield rate,j₂?

Which of the following statements is true about an inverted yield curve?

A $1000 bond paying coupons at j₂ = 11% is redeemable at par on November 29,2013.When it is purchased on October 5,2010,the quoted price is Q = $ 1141.59 to yield j₂ = 6%.What is the full (or dirty) price on October 5,2010?

A $1000 bond with a redemption date of February 1,2024 is purchased on October 7,2010.The quoted price,q,is 104.25.The bond is redeemable at par and pays interest at j₂ = 11%.What is the purchase price (full or dirty price) of the bond?

A $1000 bond has semi-annual coupons at j₂= 10%.It is redeemable at par in n-years (n > 5) .The bond is callable in 5 years at par.The price of the bond to yield j₂ = 8%,assuming the bond is held to maturity,is $1172.92.Which of the following is the correct answer?

A $100 bond with semi-annual coupons,redeemable at 105 in 8 years,can be purchased at a discount of $18.19 to yield j₂ = 12%.What is the bond coupon rate,j₂?

A $1000 bond with semi-annual coupons at j₂ = 8% is redeemable at 99 in 10 years.It is callable at 105 in 5 years.Determine the highest purchase price to guarantee a yield of at least j₂ = 7%.

A $10,000 six-year accumulation bond (compound interest bond) with a coupon rate of j₂ = 4% is purchased for $9,541.62.The pricing yield rate is at j₂ = 5%.Determine the redemption value of this bond (nearest dollar) .

A bond is purchased at a premium and the price is calculated assuming a yield of j₂ = 11%.You are given that the semi-annual coupon payment is $65 and that the book value adjustment portion of the 1^st coupon is $7.65.What is the price of the bond?

A 3-year bond pays level semi-annual coupons and is bought to yield j₂ = 15%.The interest portion of the first coupon is $57.40.The amount of the write-up in the book value of the bond at the time of the last coupon payment is $46.51.What is the coupon paid each period?

A $5000 bond with interest at j₂ = 10% is redeemable at 98 in 10 years.It is purchased at a pricing yield rate of j₂ = x% and the resultant price is $5080.Using the method of averages,determine x

A $2000 bond is redeemable at 102 in 6 years.The absolute value of the sum of the write downs (book value adjustment column) is $53.42.What is the price of the bond?

Exam 6: Bonds

A 10-year $5000 bond redeemable at par,is purchased by Ms.Gates that pays coupons at j2 = 6%.She purchases the bond for $3753.78 to yield j2 = 10%.She then immediately sells all of the coupons to another investor at a price of $2038.55.What rate of return,j2 does Ms.Gates earn on her investment?

A $20,000 bond is redeemable at 105 in 15 years and pays bond interest at j2 = 12%.The purchase price is $22,200 based on a yield rate of j2 = x%.Determine × using the method of averages.

The market (or clean) price of a bond on June 15,2010 is 102.75.The accrued interest on this date is $10.27.If an investor wishes to purchase $1200 worth of this bond,what is the full (or dirty) price?

A bond,paying semi-annual coupons of $60 is purchased to yield j2 = 13%.The absolute value of the write up (book value adjustment) in the 6th coupon period is $5.81.What is the interest on the book value for the 11th coupon,I11?

A $1000 bond with semi-annual coupons at j2 = 6% (Feb.1 and Aug.1 of every year) is sold for $980 on August 1,2007.It is bought for $920 on February 1,2000.Using the method of averages,what is the yield rate,j2?

Which of the following statements is true about an inverted yield curve?

A $1000 bond paying coupons at j2 = 11% is redeemable at par on November 29,2013.When it is purchased on October 5,2010,the quoted price is Q = $ 1141.59 to yield j2 = 6%.What is the full (or dirty) price on October 5,2010?

A $1000 bond with a redemption date of February 1,2024 is purchased on October 7,2010.The quoted price,q,is 104.25.The bond is redeemable at par and pays interest at j2 = 11%.What is the purchase price (full or dirty price) of the bond?

A $1000 bond has semi-annual coupons at j2= 10%.It is redeemable at par in n-years (n > 5) .The bond is callable in 5 years at par.The price of the bond to yield j2 = 8%,assuming the bond is held to maturity,is $1172.92.Which of the following is the correct answer?

A $100 bond with semi-annual coupons,redeemable at 105 in 8 years,can be purchased at a discount of $18.19 to yield j2 = 12%.What is the bond coupon rate,j2?

A $1000 bond with semi-annual coupons at j2 = 8% is redeemable at 99 in 10 years.It is callable at 105 in 5 years.Determine the highest purchase price to guarantee a yield of at least j2 = 7%.

A $10,000 six-year accumulation bond (compound interest bond) with a coupon rate of j2 = 4% is purchased for $9,541.62.The pricing yield rate is at j2 = 5%.Determine the redemption value of this bond (nearest dollar) .

A bond is purchased at a premium and the price is calculated assuming a yield of j2 = 11%.You are given that the semi-annual coupon payment is $65 and that the book value adjustment portion of the 1st coupon is $7.65.What is the price of the bond?

A 3-year bond pays level semi-annual coupons and is bought to yield j2 = 15%.The interest portion of the first coupon is $57.40.The amount of the write-up in the book value of the bond at the time of the last coupon payment is $46.51.What is the coupon paid each period?

A $5000 bond with interest at j2 = 10% is redeemable at 98 in 10 years.It is purchased at a pricing yield rate of j2 = x% and the resultant price is $5080.Using the method of averages,determine x

A $2000 bond is redeemable at 102 in 6 years.The absolute value of the sum of the write downs (book value adjustment column) is $53.42.What is the price of the bond?

A $20,000 bond is redeemable at 105 in 15 years and pays bond interest at j₂ = 12%.The purchase price is $22,200 based on a yield rate of j₂ = x%.Determine × using the method of averages.

A bond,paying semi-annual coupons of $60 is purchased to yield j₂ = 13%.The absolute value of the write up (book value adjustment) in the 6^th coupon period is $5.81.What is the interest on the book value for the 11^th coupon,I₁₁?

A $1000 bond with semi-annual coupons at j₂ = 6% (Feb.1 and Aug.1 of every year) is sold for $980 on August 1,2007.It is bought for $920 on February 1,2000.Using the method of averages,what is the yield rate,j₂?

A $1000 bond paying coupons at j₂ = 11% is redeemable at par on November 29,2013.When it is purchased on October 5,2010,the quoted price is Q = $ 1141.59 to yield j₂ = 6%.What is the full (or dirty) price on October 5,2010?

A $1000 bond with a redemption date of February 1,2024 is purchased on October 7,2010.The quoted price,q,is 104.25.The bond is redeemable at par and pays interest at j₂ = 11%.What is the purchase price (full or dirty price) of the bond?

A $1000 bond has semi-annual coupons at j₂= 10%.It is redeemable at par in n-years (n > 5) .The bond is callable in 5 years at par.The price of the bond to yield j₂ = 8%,assuming the bond is held to maturity,is $1172.92.Which of the following is the correct answer?

A $100 bond with semi-annual coupons,redeemable at 105 in 8 years,can be purchased at a discount of $18.19 to yield j₂ = 12%.What is the bond coupon rate,j₂?

A $1000 bond with semi-annual coupons at j₂ = 8% is redeemable at 99 in 10 years.It is callable at 105 in 5 years.Determine the highest purchase price to guarantee a yield of at least j₂ = 7%.

A $10,000 six-year accumulation bond (compound interest bond) with a coupon rate of j₂ = 4% is purchased for $9,541.62.The pricing yield rate is at j₂ = 5%.Determine the redemption value of this bond (nearest dollar) .

A bond is purchased at a premium and the price is calculated assuming a yield of j₂ = 11%.You are given that the semi-annual coupon payment is $65 and that the book value adjustment portion of the 1^st coupon is $7.65.What is the price of the bond?

A 3-year bond pays level semi-annual coupons and is bought to yield j₂ = 15%.The interest portion of the first coupon is $57.40.The amount of the write-up in the book value of the bond at the time of the last coupon payment is $46.51.What is the coupon paid each period?

A $5000 bond with interest at j₂ = 10% is redeemable at 98 in 10 years.It is purchased at a pricing yield rate of j₂ = x% and the resultant price is $5080.Using the method of averages,determine x