CH 6 Quiz

The MerryWeather Firm wants to raise $18 million to expand its business. To accomplish this, the firm plans to sell 10-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 5 percent. What is the minimum number of bonds the firm must sell to raise the $18 million it needs? Use annual compounding.

86,638

14,660

18,000

43,319

29,320

A bond that pays interest annually yields a rate of return of 9.25 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?

2.31 percent

13.25 percent

1.05 percent

4.00 percent

5.05 percent

A 5.5 percent $1,000 bond matures in seven years, pays interest semiannually, and has a yield to maturity of 6.23 percent. What is the current market price of the bond?

$945.08

$947.21

$959.09

$959.60

$962.40

If Treasury bills are currently paying 3.2 percent and the inflation rate is 2.8 percent, what is the approximate real rate of interest? The exact real rate?

A zero coupon bond with a face value of $1,000 is issued with an initial price of $455.50. The bond matures in 18 years. What is the implicit interest, in dollars, for the first year of the bond's life? Use semiannual compounding.

$6.09

$11.06

$20.34

$10.17

$12.19

Best Western has $1,000 face value bonds outstanding. These bonds pay interest semiannually, mature in three years, and have a 5 percent coupon. The current price is quoted at 101. What is the yield to maturity?

2.32 percent

4.64 percent

5.00 percent

5.13 percent

5.27 percent

The nominal rate of return on the bonds of Stu's Boats is 8.75 percent. The real rate of return is 2.7 percent. What is the rate of inflation?

3.24 percent

6.05 percent

4.38 percent

5.89 percent

5.73 percent

Wine and Roses, Inc. offers a 8.0 percent coupon bond with semiannual payments and a yield to maturity of 8.66 percent. The bonds mature in 16 years. What is the market price of a $1,000 face value bond?

	$1,257.58
	$1,685.84
	$1,629.26
	$943.42
	$1,167.47