4: The one year spot interest rate is 2% and the two year spot rate is 1%. What is the price of a two-year bond with face value 1,000 and coupon rate 3%? Assume that coupons are paid annually.

a.1039.70

b.1036.18

c.1039.12

d.1049.21

5:

A bond with 2 years to maturity and annual coupon payments has a face value of $1500. Its coupon rate is 3% and its yield to maturity is 8%. To the nearest dollar, its price is;

Select one:

a.$938

b.$1243

c.$1411

d.None of the other listed answers

6:

Which of the following statements is FALSE? i. Bond coupon payments are on average more certain than stock dividends. ii. The Net Present Value is preferred over the Payback Period as an investment decision rule. iii. Shareholders have the first claim on the cash flows of the company.

Select one:

a.Only i

b.i and iii

c.Only iii

d.i and ii