Question

o f the daily rate is 0.02%, then the APR would be A) 10.40%; 10.96% would be and B) 7.57% and the EAR would be C) 730%:7.57% D) 10.96%: 10.40% 7.30% 21) Twenty years ago, a firm issued $1,000 p onds with an 8% annual coupon rate and a term to maturity on this type of investment is 6%, what would these bonds sell for of 25 years. If current market interest rates on this type of investme today if they made annual coupon payments A) $937.90 D) $1,116.54 B) $1,084.25 C) $1,105.94 22) Your firm has issued 20-year zero-coupon bon $400, what is the annual yield to maturity, assuming annual compounds 20-year zero-coupon bonds with a $1.000 par value. If the bonds are currently selling for A) 4.69%% B) 6.10% C) 7.50% D) This question cannot be answered because there is no coupon payment provie ar making annual coupon 25) Bailey's Supermarkets has $1.000 par value bonds with a coupon rate of 8% per year making annua payments. If there are 6 years remaining prior to maturity and these bonds are selling for $970, what is the annual yield to maturity for these bonds? D) 8.66% A) 1.78% B) 5.15% C) 7.64% 24) Which of the following statements is TRUE about BONDS? A) Ceteris paribus, bonds with lower YTMs would have higher prices. B) Borrowers buy bonds. C) A 6% annual coupon bond that is selling at a premium would have an annual yield to maturity above 6%. D) If you purchase a bond at a discount and hold it to maturity, you would experience a capital loss. D) 19.67% 25) You have $500 today which is enough to buy 14 rare stamps.. If the price of rare stamps is expected to increase by 3.5% over the next year, what approximate nominal rate would you have to earn to be able to buy 16 rare stamps next year? A) 15.79% B) 17.79% C) 13.16%.

Answer 1

20]

APR = daily rate * 365

APR = 0.02% * 365 = 7.30%

EAR = (1 + daily rate)³⁶⁵ - 1

EAR = (1 + 0.02%)³⁶⁵ - 1 = 7.57%

The answer is (C)