Question

1) The principal amount of a bond that is repaid at the end of the loan term is called the bond's: A) coupon B) face value. C) maturity D) yield to maturity E) coupon rate. 2) A bond with a face value of $1,000 that sells for $1.000 in the market is called a bond A) par value B) discount C) premium D) zero coupon E) floating rate 3) A bond with a coupon rate of 6 percent that pays interest semiannually and is priced at par will have a market price of and interest payments in the amount of each. A) $1,006: $60 B) $1.060: S30 C) $1,060: S60 D) $1,000; $30 E) $1.000: 60 when the yield to maturity is 4) All else constant, a bond will sell at coupon rate. A) a premium; greater than B) a premium; equal to C) at par; greater than D) at par, less than E) a discount; greater than 5) Aspens is preparing a bond offering with a coupon rate of 5.5 percent. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest annually. Which one of the following statements is correct? Assume a face value of $1,000. A) The bonds will pay 19 interest payments and one principal payment. B) The bonds will initially sell at a discount. C) At maturity, the bonds will pay a final payment of $1,027.50.

Answer 1

Page Date key definitions. face value: St Also known as of the bond which is returned bond Holders at maturity Par Value to the Coupan: Payment: Rate & Amount of Payment 8 A bond carries specific Interest is known as Coupan matunity means total time till maturity. yield to matunty : Reauired Rate of Return on Bond: Applying the above definition Answer to the first Question would be as under. The principle Amount of a bond that is repaid. at the end of loan term is called the Bonds "face value" Hence option (B) is the correct option.

Page Date (2) Basic Rules for Bond valuation are. Causes Effect Yield to Maturity = Coupan rate Bond Sells at Par value. Mield to Maturity > Coupan rate Bonds selle at discount yield to Matunt Coupan rate Bond Sells at Premium longer the Matunity of Bond Greater the bond price Change Twith a given Change in YTM By Applying these Rules Answer to the Question & I would be es under A Bond with a face value of $1000 that sells. $1000 in the Market is called "Par value" Hence. option A is correct. Calculation of Coupan payment Annual Coupan rate - 6%. Semi Annual Coupan rate = 6% - 30% Semi Annual Compan payment $100003% 230 Hence: A bond with coupan rate 64. Pq. that pays lut semiannual will have market price of $1000 and lutrest payment in the Amount of $30 each. option 'D' is the correct.

Page Date By Applying the Rules that given in the above table: Answer of Question 4 wowed. be as under All else constant, a bond. Sells at a discount when yield to Matunity is greater than the Compan rate option 'E is the correct option The bonds will lntially sell at discount option B' is the correct option option D is not correct because the bond will pay only 10 luterest Payment. option C is not correct, because when bond Sells at par. its YTM = Coupan and its Matunity Price will Always Eaual to par valul le $1000