Question 6 (3 points) Assume that you own a coupon bond. If the market interest rates on other similar bonds decreases, you can be sure that?

A.The market price of your bond will fall.

B.The par value of your bond will rise.

C.The market price of your bond will rise.

D.The coupon payments on your bond will fall.

Question 7 (3 points) Which of the following does not stay constant over the life of a (non-callable) bond:

A.The secondary market price.

B.The Par Value.

C.The coupon rate.

D. The maturity date.

Question 8 (3 points) Assume we have two newly issued bonds. Bond X has a rating of AA and Bond Y a BB default rating. As a result:

A.We can expect newly issued Bond Y to have a higher coupon rate than Bond X.

B.We can expect both bonds that have the same price when newly issued and the same coupon rate.

C.We can expect newly issued Bond Y to have a higher par value than Bond X.

D.We can expect newly issued Bond Y to have a higher price than Bond X.

Question 9 (3 points)We can expect the present value of a bond to exceed the par value of the same bond when.

A.The current market interest rate on a comparable asset is less than the coupon rate.

B.The current market interest rate on a comparable asset is equal to the coupon rate.

C.The current market interest rate on a comparable asset is greater than the coupon rate.

Question 10 (3 points) When a bond matures:

A. The coupon rate is reset to reflect current market interest rates.

B.An annual coupon payment is made.

C. The bond holder is paid the bond's par value (= $1,000).

D. The bond expires and a new bond is issued.

Question 11 (10 points) How much should you pay today for a bond with the following characteristics? par value = $1,000, maturity in 2 years, coupon = 3%, 2-year expected market interest rate = 5%. Please show the formula that you use in your calculation.