6.

If interest rates overnight were to fall 176 basis points, how do the prices for the two bonds change?

a.percentage price changes for bonds A and Z equal 3.75% and 23.49%, respectively.

b.percentage price changes for bonds A and Z equal 3.26% and 23.49%, respectively.

c.percentage price changes for bonds A and Z equal 3.26% and 20.43%, respectively.

d.percentage price changes for bonds A and Z equal 4.31% and 23.49%, respectively.

e.percentage price changes for bonds A and Z equal 4.31% and 20.43%, respectively.

The following set-up pertains to the next few questions

A bond with a coupon rate of 7.70% has a yield-to-maturity that today equals 9.50%.The $1,000 bond pays coupons every 6 months, 21 coupons remain, and a coupon was paid yesterday.Suppose you buy this bond and hold it so that you receive 6 coupons.You sell the bond upon receiving that last coupon.

7.

When you sell the bond say that its yield-to-maturity still equals its original value.What will be the bond's price when you sell it?

a.$995b.$1,205c.$905d.$823e.$1,095

8.

Suppose that when you sell the bond its yield-to-maturity has increased by 100 basis points.What would have been yourannualrate of return for the bond investment?

a.7.88%b.5.38%c.7.16%d.6.51%e.5.92%

9.

What is the annual capital gains yield expected over the next year for the following bond if interest rates remain constant:4.50% coupon rate; 10 full years to maturity (semi-annual coupons); $625 current price.

a.3.50%b.2.89%c.3.85%d.4.23%e.3.18%