C214 Financial Management Math Problems
6.5, 7.1-8 EXAM (2025/2026) QUESTIONS
AND (elaborated) ANSWETRS WITH
COMPLETE SOLUTIONS
Calculate the value of a bond that matures in 15 years and has a $1,000 face value. The coupon
rate is 9 percent and the investor's required rate of return is 11 percent. Assume annual
compounding.
$798.64
$856.18
$1,000.00
$1,123.00 - Answer: $856.18
Calculator Inputs
N = 15
FV = 1000
PMT = 1000*.09 = 90
I = 11
Risky, Inc. bonds have a 12 percent coupon rate. The interest rate is paid semiannually and the
bonds mature in 6 years. The bonds have a par value of $1,000. If your required rate of return is
7 percent, what is the value of the bond?
$920.57
$1,133.21
$1,241.58
,$1,821.38 - Answer: $1,241.58
Calculator Inputs
PMT = 1000*.12 = 120/2 = 60
N = 6*2 = 12
FV = 1000
I = 7/2 = 3.5
Acme Enterprises 20-year, $1,000 par value bonds pay 10 percent interest annually. The market
price of the bonds is $1,050, and your required rate of return is 10 percent. Determine the value
of the bond to you, given your required rate of return. Should you purchase this bond?
$1,000, yes buy the bond because it's underpriced
$1,000, no do not buy the bond because it's overpriced
$1,050, yes buy the bond because it's underpriced
$1,050, no do not buy the bond because it's overpriced - Answer: $1,000, no do not buy the
bond because it's overpriced
By calculating the bond price based on your required return you find that you are only willing to
pay $1,000 (FV=1000,I=10%,PMT =100, N=20). Since this is less than the current market price of
$1,050 you should not buy the bond.)
What is the value of a bond?
-The present value of its cash flows
-The face value of the bond plus the coupon payments
-The coupon payments of the bond
-The face value of the bond
-The future value of its cash flows - Answer: The present value of its cash flows
, The value of a bond (price you would be willing to pay today) is the present value of its future
cash flows. This includes any coupon payments it may have and its future value (the face value
paid at maturity).
Trampoline Inc. wants to expand their business. They will issue bonds to fund their expansion. If
current required rate of return for investors is 11%, what should the price be for their bonds
with a $1000 face value, 15 years to maturity, and a coupon rate of 10.5% paid semi-annually?
$901.98
$947.52
$889.76
$921.13
$963.67 - Answer: $963.67
I 5.5%=11%/2 N30=15*2 PMT52.5=(0.105*1000)/2FV1000 Price($963.67)
Tom purchased stock from HAL Corporation one year ago for $179.00. He recently received one
dividend payment in the amount of $5.05 and then sold the stock for $182.00. What is Tom's
return?
6.5%
-1.11%
-1.65%
1.68%
4.5% - Answer: 4.5%
Using the holding period return equation, we can solve for our return.
ks = [(P1 + D1)/P0]- 1
6.5, 7.1-8 EXAM (2025/2026) QUESTIONS
AND (elaborated) ANSWETRS WITH
COMPLETE SOLUTIONS
Calculate the value of a bond that matures in 15 years and has a $1,000 face value. The coupon
rate is 9 percent and the investor's required rate of return is 11 percent. Assume annual
compounding.
$798.64
$856.18
$1,000.00
$1,123.00 - Answer: $856.18
Calculator Inputs
N = 15
FV = 1000
PMT = 1000*.09 = 90
I = 11
Risky, Inc. bonds have a 12 percent coupon rate. The interest rate is paid semiannually and the
bonds mature in 6 years. The bonds have a par value of $1,000. If your required rate of return is
7 percent, what is the value of the bond?
$920.57
$1,133.21
$1,241.58
,$1,821.38 - Answer: $1,241.58
Calculator Inputs
PMT = 1000*.12 = 120/2 = 60
N = 6*2 = 12
FV = 1000
I = 7/2 = 3.5
Acme Enterprises 20-year, $1,000 par value bonds pay 10 percent interest annually. The market
price of the bonds is $1,050, and your required rate of return is 10 percent. Determine the value
of the bond to you, given your required rate of return. Should you purchase this bond?
$1,000, yes buy the bond because it's underpriced
$1,000, no do not buy the bond because it's overpriced
$1,050, yes buy the bond because it's underpriced
$1,050, no do not buy the bond because it's overpriced - Answer: $1,000, no do not buy the
bond because it's overpriced
By calculating the bond price based on your required return you find that you are only willing to
pay $1,000 (FV=1000,I=10%,PMT =100, N=20). Since this is less than the current market price of
$1,050 you should not buy the bond.)
What is the value of a bond?
-The present value of its cash flows
-The face value of the bond plus the coupon payments
-The coupon payments of the bond
-The face value of the bond
-The future value of its cash flows - Answer: The present value of its cash flows
, The value of a bond (price you would be willing to pay today) is the present value of its future
cash flows. This includes any coupon payments it may have and its future value (the face value
paid at maturity).
Trampoline Inc. wants to expand their business. They will issue bonds to fund their expansion. If
current required rate of return for investors is 11%, what should the price be for their bonds
with a $1000 face value, 15 years to maturity, and a coupon rate of 10.5% paid semi-annually?
$901.98
$947.52
$889.76
$921.13
$963.67 - Answer: $963.67
I 5.5%=11%/2 N30=15*2 PMT52.5=(0.105*1000)/2FV1000 Price($963.67)
Tom purchased stock from HAL Corporation one year ago for $179.00. He recently received one
dividend payment in the amount of $5.05 and then sold the stock for $182.00. What is Tom's
return?
6.5%
-1.11%
-1.65%
1.68%
4.5% - Answer: 4.5%
Using the holding period return equation, we can solve for our return.
ks = [(P1 + D1)/P0]- 1
