Financial Analytics Exam #2 QUESTIONS AND
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Terms in this set (60)
Coupon Bond The stated interest payment made on a bond ($100)
Face Value The principal amount of a bond that is repaid at the
end of the term. Also called par value. (assume
$1000 if not told otherwise)
Coupon Rate The annual coupon divided by the face value of a
bond. (100/1000) = 10%
Maturity Specific date on which the principal amount of a
bond (ex. the face value) is repaid. (when bond
expires & get face value back)
Yield to Maturity (YTM) The rate required in the market on the bond. This is
quoted as an APR and is often not the same as the
coupon rate.
Bond Contract Terms: coupon, face value, coupon rate, & maturity.
These terms are fixed and don't change.
,The price of a bond is equal to the present value, future cashflows
__________ of the bond's _______.
Bond Valuation: N = 10 years
What was the price of the bond I/Y = 10% (based on YTM)
when it was issued if the yield to PMT = 100
maturity was 10 percent? PV = ?
FV = 1000
PV = -1000
Bond Valuation: equal
When coupon rate is equal to YTM,
the price of the bond (PV) is _____ to
par value (face value).
, Bond Valuation: 10%
What is the value of the bond now if N=9
the yield to maturity is 10 percent? 7 I/Y = 10%
percent? 13 percent? PMT = 100
FV = 1,000
PV = ? (1,000)
7%
N=9
I/Y = 7%
PMT = 100
FV = 1,000
PV = ? (1,195.46)
13%
N=9
I/Y = 10%
PMT = 100
FV = 1,000
PV = ? (846.05)
When coupon rate < YTM price of bond < par value (trading at discount price)
When coupon rate > YTM price of bond > par value (trading at premium price)
When r ↑, PV? ↓
When r ↓, PV ? ↑
Payment Frequency: N = 18 (9 years, 18 semiannual)
Now, assume that the bond makes I/Y = 5% (10% YTM / 2 bc semiannual)
semiannual coupon payments. What PMT = 50 ( bc semiannual)
is the value of the bond now if the FV = 1,000
yield to maturity is 10 percent? PV = ? (1,000)
CORRECT DETAILED ANSWERS | ALREADY
SCORED A+ | NEWLY UPDATED
Save
Terms in this set (60)
Coupon Bond The stated interest payment made on a bond ($100)
Face Value The principal amount of a bond that is repaid at the
end of the term. Also called par value. (assume
$1000 if not told otherwise)
Coupon Rate The annual coupon divided by the face value of a
bond. (100/1000) = 10%
Maturity Specific date on which the principal amount of a
bond (ex. the face value) is repaid. (when bond
expires & get face value back)
Yield to Maturity (YTM) The rate required in the market on the bond. This is
quoted as an APR and is often not the same as the
coupon rate.
Bond Contract Terms: coupon, face value, coupon rate, & maturity.
These terms are fixed and don't change.
,The price of a bond is equal to the present value, future cashflows
__________ of the bond's _______.
Bond Valuation: N = 10 years
What was the price of the bond I/Y = 10% (based on YTM)
when it was issued if the yield to PMT = 100
maturity was 10 percent? PV = ?
FV = 1000
PV = -1000
Bond Valuation: equal
When coupon rate is equal to YTM,
the price of the bond (PV) is _____ to
par value (face value).
, Bond Valuation: 10%
What is the value of the bond now if N=9
the yield to maturity is 10 percent? 7 I/Y = 10%
percent? 13 percent? PMT = 100
FV = 1,000
PV = ? (1,000)
7%
N=9
I/Y = 7%
PMT = 100
FV = 1,000
PV = ? (1,195.46)
13%
N=9
I/Y = 10%
PMT = 100
FV = 1,000
PV = ? (846.05)
When coupon rate < YTM price of bond < par value (trading at discount price)
When coupon rate > YTM price of bond > par value (trading at premium price)
When r ↑, PV? ↓
When r ↓, PV ? ↑
Payment Frequency: N = 18 (9 years, 18 semiannual)
Now, assume that the bond makes I/Y = 5% (10% YTM / 2 bc semiannual)
semiannual coupon payments. What PMT = 50 ( bc semiannual)
is the value of the bond now if the FV = 1,000
yield to maturity is 10 percent? PV = ? (1,000)
