QUESTION $15$

Assuming that the market interest rate does not change, as a premium bond moves closer in time to

maturity, its price will.

A$.$ Increase

B$.$ Decrease

C$.$ Remain the same

D$.$ It depends on the market interest rate

QUESTION $16$

Suppose we have a $4$ year, $8\%$ coupon rate, $$1000$ face value bond. The market interest rate is $4\%.$ If

this bond makes semi$-$annual payments which of the following would we use to calculate the price?

A$.$ The number of periods would be $4,$ the coupon payment would be $$40,$ and the interest rate for

the PV calculation would be $2\%.$

B$.$ The number of periods would be $8,$ the coupon payment would be $$40,$ and the interest rate for

the PV calculation would be $4\%.$

C$.$ The number of periods would be $8,$ the coupon payment would be $$80,$ and the interest rate for

the PV calculation would be $2\%.$

D$.$ The number of periods would be $8,$ the coupon payment would be $$40,$ and the interest rate for

the PV calculation would be $2\%.$