QUESTION 3 " Which of the following statements is FALSE? "XYZ $1000 8% bond with 10 years is selling at $960, the yield is less than 8%." The price of a zero coupon bond is the present value of face value. A bond with a coupon rate of 10% and yield of 12% will sell at a discount. Prices of longer maturity bonds are more sensitive to interest rate changes. OO QUESTION 4 "In 2006 BigCo issued 20-year bonds at face value with a yield to maturity of 6.75%. In 2016, BigCo is considering retiring these bonds by purchasing them in the bond market. The bonds are currently trading at a yield to maturity of 4.75%. To repurchase the bonds, BigCo will have to pay:" Less than face value because interest rates have fallen More than face value because interest rates have fallen. Exactly face value because they were issued at face value Not enough information QUESTION 5 What is the price of a 10-year $50,000 "junk" bond that pays a coupon rate of 5% p.a. paid quarterly, if the market yield is 25% p.a. compounding semi-annually. 13,539.18 40,884.79 45,453.94 14,294.97