Question

Can anybody help me with these questions pls

Questions 1-10 are based on the following information. Bond valuation. On Jan. 1. 2008, your cousin, Laura, purchased one 3-year semiannual bond with a coupon rate of 8%. The yield of the bond was at the time 1. How much did Laura pay for the hond a. 974.21 b. 974,69 c. 1.000 d767.90 2. This bond was a a discount bond b. premium bend c. par band d. all of the above. 3. How much did the firm actually borrow from Laura on Jan. 1. 2008? a $1,000 b. $974.21 c. 5974.69 d. 576790 respectively. 4. The coupon payment and interest in the first period were a S40 and $40 b $40 and $43.84 c. SRO and S80 d. S40 and $80 (Hint: interest outstanding debt interest rate) 5. Did the fimm fully pay its interest for the first period? a. Yes b. No c. Cannot determine (Hint: you should distinguish coupon payment from interest payment, they are not necessarily equivalent.) 6. On July 1, 2008, Laura persuaded you to buy one bond. Suppose the bond yield was not changed. How much did you actually pay to get this bond? a 97805 b974.21 c974.69 d. 978. SS 7. If bond yield didn't change in the firm's balance sheet, did the firm's long-term liability change on July 1, 2008, in comparison with Jan. 1. 2008? a. Yes, long-term liability increased b. Yes, long-term liability decreased c. No, long-term liability did not change d. none of the above 8. If the bond yield didn't change, the firm's interest expense, which is an income statement item, would in the period from July 1 to Dec. 31. 2008 in comparison with the period from Jan. 1 to Jun 30, 2008 a. increase b. decrease e not change

Answer 1

Q.1 The price of the bond per 1000 nominal on 1 Jan, 2008 is

P = 40x1.09^-0.5 + 40x1.09^-1 + 40x1.09^-1.5 + 40x1.09^-2 + 40x1.09^-2.5 +1040x1.09^-3

^{= 979.15}

^{Unfortunately, none of the given options is correct.}

^{Q.2 c The bond is redeemable at par.}

^{Q.3 a The actual amount borrowed is the par value.}

^{Q.4 a}