Mr. Harry a foreign investor in US is offered to invest in a bond that has a coupon rate of 9%, a face value of $1,000 and will mature 10 years from today. The current Interest rate (annualized yield) is 12%. (PVIF= 0.322, PVIFA=5.650)

1- Between Bond and Stocks, the investor should prefer bond because:

a.

Bond is offering fluctuating interest unlike stocks which is fixed.

b.

None of the options

c.

Bond has lesser risk than Stocks.

d.

Bond has a longer maturity period than stocks.

2- Based on the case if the annualized yield of the Bond is reduced to 9%, then:

a.

It is not good to the investor since he will have less return

b.

The PVBo will be higher and investor will pay less.

c.

It is good for investor, since he will have more return.

d.

The PVB0 will be less and investor will pay more.

3- If the computed Price of bond is less than the par value, what category of bond is it?

a.

Premium Bond

b.

Par Bond

c.

None of the given option

d.

Discount Bond

4- What is the coupon payment each year?

a.

$120

b.

$30

c.

$90

d.

$100

5- What is the Price value of the bond at maturity?

a.

$186.5

b.

$830.5

c.

$322

d.

$508.5