Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show step by step. Don''t want answers only... 1A new one-year bond pays interest of 1.04%. A new two-year bond pays interest of 1.46%.

Please show step by step. Don''t want answers only...

1A new one-year bond pays interest of 1.04%. A new two-year bond pays interest of 1.46%. Using expectations theory of term structure and assuming the market is in equilibrium, what interest rate does the market expect a new one year bond to have one year from now? a. 0.42% b. 1.18% c. 1.25% d. 1.88%

2. The value of any asset a. is based upon the benefits provided by the asset in prior years. b. is based upon the benefits that the asset will provide the owner of the asset this year. c. equals the present value of future benefits accruing to the assets owner. d. is not described by any of the above. ANS: C DIF: E REF: Learning Objectives

3. The greater the uncertainty about an assets future benefits, a. the lower the discount rate investors will apply when discounting those benefits to the present. b. the higher the discount rate investors will apply when discounting those benefits to the present. c. the greater is the present value of those benefits. d. none of the above.

4. You will be recieving $204,000.00 at the end of each year for the next 20 years. If the correct discount rate for such a stream of cash flows is 10% then what is the present value of the cash flows? a. $1,736,767.00 b. $4,080,000.00 c. $185,454.55 d. none of the above

5. A bonds coupon rate

a. equals its annual coupon payment divided by the bonds current market price. b. varies during the life of the bond. c. equals its annual coupon payment divided by its par value. d. both a and b are correct.

6. WeOweYou, Inc. has a 12 year bond outstanding that makes 9.5% annual coupon payments. If the appropriate discount rate for such a bond is 7%, what the the appropriate price for the bond? a. $1,200.73 b. $1,000.00 c. $1,198.57 d. $754.56

7. WeOweEveryone, Inc. has a 12 year bond outstanding that has 9.5% coupon rate. If the appropriate discount rate for such a bond is 7%, what the the appropriate price for the semi-annual coupon paying bond? a. $1,200.73 b. $1,198.57 c. $1,000.00 d. $762.77

8Elroy Investors is interested in purchasing the bonds of the Judy Company. Judys bonds are currently priced at $1,100.00 and have 14 years to maturity. If the bonds have a 6% coupon rate what is the yield-to-maturity of these annual coupon paying bonds? a. 5.00% b. 4.99% c. 2.50% d. none of the above.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Technical Analysis The Complete Resource For Financial Market Technicians

Authors: Charles Kirkpatrick, Julie Dahlquist

3rd Edition

0134137043, 978-0134137049

More Books

Students also viewed these Finance questions

Question

=+2 Identify the treatment and response.

Answered: 1 week ago

Question

Behaviour: What am I doing?

Answered: 1 week ago