Question
1a.The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the
1a.The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually. Assuming the appropriate YTM on the Sisyphean bond is 9%, then this bond will trade at:
A. a premium
B. a discount.
C.par.
D.None of the above
1b.Consider the following yields to maturity on various oneyear zerocoupon securities:
Security | Yield (%) |
Treasury | 4.6 |
AAA corporate | 4.8 |
BBB corporate | 5.6 |
B Corporate | 6.2 |
The price (expressed as a percentage of the face value) of a oneyear, zerocoupon corporate bond with a BBB rating is closest to:
A.94.70
B.94.16
C.95.42
D.95.60
1c.Which of the following statements is FALSE?
A.Because the cash flows from stock are known with certainty, we can discount them using the riskfree interest rate.
B.There are two potential sources of cash flows from owning a stock.
C.An investor might generate cash by choosing to sell the shares at some future date.
D.An investor will be willing to pay a price today for a share of stock up to the point that this transaction has a zero NPV.
PLEASE ANSWER ALL QUESTION. NO NEED TO SHOW WORK ONLY ANSWER. THANK YOU!
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