Question
i need awensers only thank you QUESTION 1 The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% (annual payments)
i need awensers only thank you
QUESTION 1
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The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% (annual payments) and a face value of $1000. It has 4 years to maturity and is selling in the market for $917. The bond makes annual coupon payments. What is the yield to maturity on this bond?
A. 4.0%
B. 5.5%
C. 1.5%
D. None of the other responses are correct.
E. 8%
8 points
QUESTION 2
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The Johnson National Bank has purchased a bond that has a coupon rate of 5.5% (annual payments) and a face value of $1000. It has 4 years to maturity and is selling in the market for $917. The bond makes annual coupon payments. What is the duration of this bond? The first step is to calculate the YTM of the bond.
Hint: Use the duration derivation formula from the text as shown on page 237 of Chapter 7. Don't try reverse engineering to find the duration by taking the YTM and then using P=-D[i/(1+i)]P in order to solve for "D"; while this second approach might seem appealing, it will produce a slightly different answer.
A. None of the other responses are correct.
B. 3.68 years
C. 3.38 years
D. 4.00 years
E. 5.50 years
8 points
QUESTION 3
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The Dillinger State Bank has purchased a corporate bond from the Interstate Manufacturing Company that has 15 years to maturity and has a coupon rate of 12.5%. Market interest rates have recently declined to 8% and the Dillinger State Bank is worried that the Interstate Manufacturing Company will exercise its right to retire the bonds early, and issue new corporate bonds with a lower coupon rate. What type of risk is the Dillinger State Bank worried about? Hint: pay special attention to Powerpoint slide no. 14 from Chapter 10.
A. Call risk
B. Credit risk
C. Interest-rate risk
D. Prepayment risk
E. Business- risk
8 points
QUESTION 4
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Which of the following is a characteristic of Treasury bills?
A. They are discount securities
B. They have more risk than other money market securities
C. They are coupon instruments
D. They are the short term debt instruments issued by major corporations
E. All of the other responses are characteristics of Treasury bills
8 points
QUESTION 5
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A financial institution that is concerned about the possibility that the purchasing power of both the interest income and principal income will decline on a loan is concerned about which of the following things?
A. Tax exposure
B. Liquidity risk
C. Business risk
D. Credit risk
E. Inflation risk
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