1. Which of the following is not true?

a. Bonds that are traded at a lower price than face value are sold with discounts.

b. The bonds yield to maturity is the rate in which it is discounted.

c. Bonds that are traded at a higher price than face value are sold with discounts.

d. None of the above (all of the above are correct).

2. Which of the following is not true?

a. The bonds current yield is total annual coupon payments divided by the bonds face value.

b. The bonds bid-ask spread refers to the spread between the bonds bid price and ask price.

c. A private bonds marginal tax rate refers to the tax rate under which the investor who holds that specific private bond will be indifferent from investing at a government bond that offers a lower rate.

d. None of the above (all of the above are correct).

3. A bond that compounds semiannually has a Face Value of $1,000 and maturity of 18 years. Assume that its coupon rate is 5.8% and yield to maturity (YTM) is 5.16%. What is this bonds market price?

4. A bond has $1,000 face value, 19 years to maturity, and 3.5% annual coupon rate with coupons paid semiannually. The yield to maturity (YTM) is 3.64%. What is this bonds market price? Assume the interest rate compounds semiannually.

5. Assume there is a bond with the coupon rate of 10.8%, yield to maturity (YTM) of 12%, and with the face value of $1,000. Further assume that the bond will mature 12 years from now, and that the interest rate will compound monthly. What is the bonds current market value?

6. A bond has $1,000 face value, 18.5 years to maturity, and 4.1% annual coupon rate with coupons paid semiannually. The yield to maturity (YTM) is 4.26%. What is this bonds market price? Assume the interest rate compounds semiannually.

7. A bond has $1,000 face value, coupon rate of 3.5%, and yield to maturity (YTM) of 3.27%. It will mature in 16 years and the interest rate will compound annually. What is this bonds current yield?

8. Assume there is a bond with the yield to maturity (YTM) of 14%, coupon rate of 12%. Further assume that the current inflation rate is 5.4%. What is the bonds real interest rate?

9. A bond is quoted 101.4942 ask, and 99.8736 bid. What is the bid-ask spread in this bond if the bonds face value is $3,500?

10. Assume the bonds invoice (dirty) price is $1,054.87, the bond has the coupon rate of 9.6% and that the coupons are paid semiannually. Further assume that the bond has the face value of $1,000. What is the bonds quoted (clean) price if the last coupon payment took place five

months ago?

11. ABCD Company plans to raise $110,,000,000 by issuing 12-year semiannual coupon bonds with coupon rate of 5.80%, yield to maturity of 6.46%, and face value of $1,000. How many bonds should ABCD sell in order to raise the $100,000,000 it needs?

12. Assume a private bond has the yield to maturity (YTM) of 10.7% and is taxable. Further assume that there is also a public bond that has the yield of maturity (YTM) of 6.7%. What is the marginal tax rate here?

13. A bond has $1,000 face value, 25 years to maturity, 4.5% annual coupon rate. The bonds current price is $976.58. Assuming the interest rate compounds semiannually, what is the bonds yield to maturity (YTM)?

14. A bond has $1,000 face value, 20 years to maturity, 7.6% annual coupon rate with coupons paid semiannually. The bond is selling today for $980. If the yield to maturity of the bond remains the same for the next 8 years, what will be the price of the bond be 8 years from today?

15. Assume a private bond has the yield to maturity (YTM) of 9.7% and is taxable. Further assume that there is also a public bond that has the yield of maturity (YTM) of 6.7%. What is the marginal tax rate here?