Question: Modern Bhd. issued a bond with 7 percent return and 1,000 face value. The interest will be paid semi-annually. In 8-years, what is the yield

Modern Bhd. issued a bond with 7 percent return and 1,000 face value. The interest will be paid semi-annually. In 8-years, what is the yield to maturity for this bond if the market price is 987?

a. 7.22%

b. 6.92%

c. 6.97%

d. 6.88%

If you expect the interest rates to decline soon but the bond market is remained unchanged. Which one of the following bonds should you purchase now to maximize your gains?

a. Long-term bond with high coupon.

b. Short-term bond with high coupon.

c. Long-term bond with low coupon.

d. Long-term bond with zero coupon.

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