Connect Valuation Concerns

 Bond Valuation Questions Composition

п»їLECTURE 7

CONNECT VALUATION CLASS QUESTIONS

Data for one particular & 2

Consider the following $1, 000 similar value zero-coupon bonds:

Relationship Years to Maturity Value

A ONE $909. 2009

M 2 $811. 62

C three or more $711. 78

G 4 $635. 52

1). The deliver to maturity on relationship A is usually.

a. 10%

b. 11%

c. 12%

d. 14%

e. not one of the above

2). The yield to maturity on connection C can be.

a. 10%

b. 11%

c. 12%

d. 14%

e. not one of the above

3). A voucher bond that pays interest annually is selling by par benefit of $1, 000, grows in 5 years, and has a voucher rate of 9%. The yield to maturity with this bond is usually

a. 6. 00%

b. 8. 33%

c. 9. 00%

d. forty five. 00%

4). Consider two bonds, A and W. Both a genuine presently can sell at their par worth of $1, 000. Every single pays fascination of $120 annually. Relationship A can mature in 5 years while connection B will certainly mature in 6 years. If the yields to maturity around the two provides change from 12% to 10%,.

a. the two bonds will increase in benefit, but connect A raises more than bond B

w. both a genuine will increase in value, yet bond B will increase more than bond A

c. both bonds will decrease in value, but bond A is going to decrease more than bond W

d. equally bonds can decrease in value, but connect B is going to decrease more than bond A

5). A Treasury bond credited in one year has a yield of 6th. 2%; a Treasury relationship due in 5 years has a deliver of 6th. 7%. A bond given by Standard Motors because of in 5 years contains a yield of 7. 9%; a bond issued by Exxon due in a single year contains a yield of 7. 2%. The default risk premiums for the bonds issued by Exxon and General Motors, correspondingly, are

a. 1 . 0% and 1 . 2%

b. 0. 5% and. 7%

c. 1 . 2% and 1 ) 0%

d. 0. 7% and 0. 5%

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