A+ Graded Paper
BUSI 320 – Chapter 10 - A+ Scored Answers
with Explanations
Questions and Mark scheme
Version: Final 1.1
, face amount of the bonds - ✔✔At the time of maturity, the repayment amount for bonds is equal to the:
8% - ✔✔If the real rate of return is 5% and the inflation premium is 3%, what is the risk-free rate of return?
risk premium - ✔✔A premium associated with special risks associated with a given investment is known as
Below par value - ✔✔Assume a bond's stated rate is 5% and the yield to maturity is 6%, will the bonds sell for par value,
above par value, or below par value?
yield curve - ✔✔The graph of the relationship between time to maturity and yield to maturity, for bonds that differ only
in their maturity dates is known as the
Less than 8% - ✔✔A $500,000, 10 year bond has a stated rate of 8% and sells for $520,000. What is the yield to
maturity?
8753.78 - ✔✔The present value of the principal payment for a $10,000, 10 year bond with a coupon rate of 8% paid
semiannually with a market rate of 10% is $________________. (Do not include a dollar sign in your answer. Round your
answer to two decimal places.)
D/K - ✔✔Which of the following formulas is used to determine the price of preferred stock?
5 - ✔✔Preferred stock has a constant annual dividend payment of $20 and a price of $400. What is the required rate of
return?
Greater than 10% - ✔✔A $1,000,000, 20 year bond has a stated rate of 10% and sells for $928,000. What is the yield to
maturity?
earnings - ✔✔Stockholders may be influenced by changes in earnings and other factors, but the ultimate value rests
with the distribution of
7961 - ✔✔What is the current/present value of a bond worth $10,000, issued for 10 years with a stated rate of 5% and a
market rate of 8%, interest paid semi-annually?
BUSI 320 – Chapter 10 - A+ Scored Answers
with Explanations
Questions and Mark scheme
Version: Final 1.1
, face amount of the bonds - ✔✔At the time of maturity, the repayment amount for bonds is equal to the:
8% - ✔✔If the real rate of return is 5% and the inflation premium is 3%, what is the risk-free rate of return?
risk premium - ✔✔A premium associated with special risks associated with a given investment is known as
Below par value - ✔✔Assume a bond's stated rate is 5% and the yield to maturity is 6%, will the bonds sell for par value,
above par value, or below par value?
yield curve - ✔✔The graph of the relationship between time to maturity and yield to maturity, for bonds that differ only
in their maturity dates is known as the
Less than 8% - ✔✔A $500,000, 10 year bond has a stated rate of 8% and sells for $520,000. What is the yield to
maturity?
8753.78 - ✔✔The present value of the principal payment for a $10,000, 10 year bond with a coupon rate of 8% paid
semiannually with a market rate of 10% is $________________. (Do not include a dollar sign in your answer. Round your
answer to two decimal places.)
D/K - ✔✔Which of the following formulas is used to determine the price of preferred stock?
5 - ✔✔Preferred stock has a constant annual dividend payment of $20 and a price of $400. What is the required rate of
return?
Greater than 10% - ✔✔A $1,000,000, 20 year bond has a stated rate of 10% and sells for $928,000. What is the yield to
maturity?
earnings - ✔✔Stockholders may be influenced by changes in earnings and other factors, but the ultimate value rests
with the distribution of
7961 - ✔✔What is the current/present value of a bond worth $10,000, issued for 10 years with a stated rate of 5% and a
market rate of 8%, interest paid semi-annually?
