Bond value--quarterly payment Answer: b Diff: M
92. Assume that a 15-year, $1,000 face value bond pays interest of $37.50 every 3 months. If you require a nominal annual rate of return of 12 percent, with quarterly compounding, how much should you be willing to pay for this bond? (Hint: The PVIFA and PVIF for 3 percent, 60 periods are 27.6756 and 0.1697, respectively.)
a. $ 821.92
b. $1,207.57
c. $ 986.43
d. $1,120.71
e. $1,358.24
Bond value--quarterly payment Answer: b Diff: M
93. Your client has been offered a 5-year, $1,000 par value bond with a 10 percent coupon. Interest on this bond is paid quarterly. If your client is to earn a nominal rate of return of 12 percent, compounded quarterly, how much should she pay for the bond?
a. $ 800
b. $ 926
c. $1,025
d. $1,216
e. $ 981
Call price--quarterly payment Answer: c Diff: M
94. Kennedy Gas Works has bonds that mature in 10 years, and have a face value of $1,000. The bonds have a 10 percent quarterly coupon (that is, the nominal coupon rate is 10 percent). The bonds may be called in five years. The bonds have a nominal yield to maturity of 8 percent and a yield to call of 7.5 percent. What is the bonds’ call price?
a. $ 379.27
b. $1,025.00
c. $1,048.34
d. $1,036.77
e. $1,136.78
Call price--semiannual payment Answer: e Diff: M
95. A 15-year bond with a 10 percent semiannual coupon and a $1,000 face value has a nominal yield to maturity of 7.5 percent. The bond, which may be called after five years, has a nominal yield to call of 5.54 percent. What is the bond’s call price?
a. $ 564
b. $1,110
c. $1,100
d. $1,173
e. $1,040
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