Question

Which one of the following is true? If a bond with a current yield of 7.34 percent is quoted at 103.835, then the annual coupon is $7.62. A bond with a par value of $5,000 is quoted at 101.273. The dollar price of the bond is $5,097.41. A bond has a par value of $1,000, a current yield of 7.43 percent, and semiannual coupon payments. The bond is quoted at 98.83. Then, the coupon rate of the bond is O 7.43%. A bond has a par value of $1,000, a current yield of 7.43 percent, and semiannual coupon payments. The bond is quoted at 98.83. Coupon payment is $36.72. If a bond with a current yield of 7.34 percent is quoted at 103.835, then the coupon rate of the bond is 8.13%.

Answer 1

TRUE : A bond has a par value of $1,000, a currrent yield of 7.43 percent, and semiannual coupon payments. The bond is quoted at 98.83. Coupon payment is $36.72

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

C D E 1 Current yield Quoted Bond price Annual coupon 7.34% 103.835 $1,038.35 $76.21 -NMOOSE 2 Par value Quoted Dollar Price $5,000.00 101.273 $5,063.65 12 13 3 Par value Current yield Quoted Dollar price Annual coupon amount Coupon rate $1,000.00 7.43% $98.83 $988.30 $73.43 7.34% 14 15 16 17 18 20 21 4 Par value Current yield Quoted Dollar price Annual coupon amount Coupon payment $1,000.00 7.43% $98.83 $988.30 $73.43 $36.72 22 TRUE 24 5 Current yield Quoted Bond price Annual coupon Par value Coupon rate 7.34% 103.835 $1,038.35 $76.21 $1,000.00 7.62% 29 30 31 32

Cell reference -

Nm 7 Current yield Quoted Bond price Annual coupon 0.0734 103.835 =1000*C3% =C2*C4 Par value Quoted Dollar Price 5000 101.273 =C7*C8% 9 10 1000 11 3 12 13 14 Par value Current yield Quoted Dollar price Annual coupon amount Coupon rate 0.0743 98.83 =C11*C13% =C12*C14 =C15/C11 16 17 18 4 19 20 Par value Current yield Quoted Dollar price Annual coupon amount Coupon payment 21 1000 0.0743 98.83 =C18*C20% =C19*C21 =C22/2 22 23 TRUE 24 25 5 26| 28 29 30 Current yield Quoted Bond price Annual coupon Par value Coupon rate 0.0734 103.835 =1000*C26% =C25*C27 1000 =C28/C29

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