A 5-Year bond is currently yielding 6%. The coupon at issuance was 6.25%. Is the bond...

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Question

A 5-Year bond is currently yielding 6%. The coupon at issuance was 6.25%. Is the bond...

A 5-Year bond is currently yielding 6%. The coupon at issuance was 6.25%. Is the bond trading at a discount, a premium, or at par?

A. Par

B. Premium

C. Discount

D. Not enough information to make a determination

Assuming continual compounding, the future value of $100 in two years at an annual rate of 10% would be closest to:

A. 120

B. 121

C. 122

D. 123

A bond is currently trading at $98.09. It has a duration of 7 years. If interest rates were to go down by 0.25%, what would be the approximate value of the bond?

A. 100

B. 97

C. 96

D. 91

business finance

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Answer 1

Answer #1

a.

As YTM < Coupon Rate

Bond is trading at premium to par value

Premium

b.

Future Value = (100)e0.10(2)

Future Value = $122

c.

Change in Price = -7(-0.0025)

Change in Price = 1.75%

Bond Price = (1 + 0.0175)(98.09)

Bond Price = $100

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Answer 2

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