Question 7

Estimate the value of a one-year bond with face value $100 and coupon rate 8% paid semi-annually. The YTM is 10%

$105 and the bond is traded at premium

The bond is traded at par

$99.04 and it is traded at discound

$95.05 and it is traded at discound

$99.04 and it is traded at premium

Question 8

Which of the following is True:

(a) A recession of the general business conditions leads to an increase on bond prices and a decrease of the nominal interest rate.

(b) An improvement of the general business conditions leads to an increase on bond prices and a increase of the nominal interest rate.

(c) Inflation rate and nominal interest rate tend to move together over time.

(d) Given a decrease in the government budget deficit, the supply curve for bonds shifts to the right.

All of the above are True

Only (a), (b) and (c) are True

None of the above is True

Only (c) and (d) are True

Only (a) and (c) are True