Use the following information to answer the next THREE questions. Consider a $1,000 par value bond with a 10% annual coupon. There are 9 years remaining until maturity. Assume that the required return on the bond is 7% and the market is in equilibrium. What is the price of the bonds?

Select one:

a. $1000.00

b. $ 769.64

c. $1272.07

d. $1195.46

e. $ 827.23

Question 12

Based on the information, you would expect the bond price to _____________ in one year.

Select one:

a. Increase by 0.59%

b. Increase by 8.37%

c. Decrease by 7.41%

d. Decrease by 1.37%

e. Increase by 3.00%

Question 13

Which of the following statements is most INCORRECT?

Select one:

a. This is a premium bond because its required rate of return is smaller than the coupon rate.

b. If the bond is callable, the YTC is a better estimate of this bond's expected return.

c. All else equal, the current yield on a premium bond will be larger than its coupon rate.

d. All else equal, an increase in the required rate of return will result in a decrease in bond price.

e. All else equal, you expect a capital loss on this bond investment at maturity.