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1. A 7-year bond has a 8 percent coupon rate with the interest paid in semi annual payments. The yield to maturity of the bond

1.

A 7-year bond has a 8 percent coupon rate with the interest paid in semi annual payments. The yield to maturity of the bond is 5.5 percent, and a face value of $1,000. What is the price of the bond?

2.

A bond with 10 years to maturity has a face value of $1,000. The bond pays an 8 percent semiannual coupon, and the bond has a 9 percent nominal yield to maturity. What is the price of the bond today?

a. $908.71

b. $934.96

c. $935.82

d. $952.37

e. $960.44

f. None of the above

3.

Interest rate risk refers to the fluctuations in bond prices due to a change in market interest rates. Bonds with ________ time to maturity experience a ________ change in price.

a. longer; smaller.

b. shorter; larger.

c. longer; greater.

d. shorter; greater.

e. Statements c and d are correct

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