Future bond value--annual payment Answer: c Diff: M
116. You just purchased a 15-year bond with an 11 percent annual coupon. The bond has a face value of $1,000 and a current yield of 10 percent. Assuming that the yield to maturity of 9.7072 percent remains constant, what will be the price of the bond one year from now?
a. $1,000
b. $1,064
c. $1,097
d. $1,100
e. $1,150
Bond coupon rate Answer: c Diff: M
117. Cold Boxes Ltd. has 100 bonds outstanding (maturity value = $1,000). The nominal required rate of return on these bonds is currently 10 percent, and interest is paid semiannually. The bonds mature in 5 years, and their current market value is $768 per bond. What is the annual coupon interest rate?
a. 8%
b. 6%
c. 4%
d. 2%
e. 0%
Bond coupon rate Answer: d Diff: M
118. The current price of a 10-year, $1,000 par value bond is $1,158.91. Interest on this bond is paid every six months, and the nominal annual yield is 14 percent. Given these facts, what is the annual coupon rate on this bond?
a. 10%
b. 12%
c. 14%
d. 17%
e. 21%
Tough:
Bond value Answer: d Diff: T
119. Assume that McDonald’s and Burger King have similar $1,000 par value bond issues outstanding. The bonds are equally risky. The Burger King bond has an annual coupon rate of 8 percent and matures 20 years from today. The McDonald’s bond has a coupon rate of 8 percent, with interest paid semiannually, and it also matures in 20 years. If the nominal required rate of return, kd, is 12 percent, semiannual basis, for both bonds, what is the difference in current market prices of the two bonds?
a. $ 0.50
b. $ 2.20
c. $ 3.77
d. $17.53
e. $ 6.28
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