Future bond value--annual payment Answer: b Diff: E N
81. A bond with a face value of $1,000 matures in 10 years. The bond has an 8 percent annual coupon and a yield to maturity of 10 percent. If market interest rates remain at 10 percent, what will be the price of the bond two years from today?
a. $ 877.11
b. $ 893.30
c. $1,061.30
d. $ 912.55
e. $1,023.06
Risk premium on bonds Answer: c Diff: E
82. Rollincoast Incorporated issued BBB bonds two years ago that provided a yield to maturity of 11.5 percent. Long-term risk-free government bonds were yielding 8.7 percent at that time. The current risk premium on BBB bonds versus government bonds is half of what it was two years ago. If the risk-free long-term government bonds are currently yielding 7.8 percent, then at what rate should Rollincoast expect to issue new bonds?
a. 7.8%
b. 8.7%
c. 9.2%
d. 10.2%
e. 12.9%
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