Question
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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