Finance 380 Exam 2 (Answered) With Complete Verified Solution

Finance 380 Exam 2 (Answered) With Complete Verified Solution A bond with several years to maturity has a coupon rate that is greater than its yield to maturity. The bond will: have a price greater than its par value or be priced at a premium The risk that the bond issuer might not make the promised coupon and/or par value payments is referred to as: default risk What is the current yield for a bond with a par value of $1,000 and a 6% annual coupon rate if the bond sells for $900? 6.67% What is the price of a bond with a par value of $1,000, an 8% coupon rate paid annually, and a yield to maturity of 6% if the bond matures in 10 years? $1,147.20 A bond with a par value of $1,000 has a 6% coupon rate with semi-annual coupon payments made on July 1 and January 1. If the bond changes hands on December 1, which of the following is true with respect to accrued interest? The buyer will pay the seller $25 of accrued interest What is the price of a bond with a par value of $1,000, 11 years to maturity and a 7% coupon rate with semi-annual coupon payments if the bond has a yield to maturity of 8%? $927.74 What is the pre-tax equivalent yield for a municipal bond with a 5.14% yield if an investor has a tax rate of 10%? 5.71% What is the yield to maturity of a bond with a par value of $1,000, a 6% coupon rate with semi-annual payments, and 5 years to maturity if the bond sells for $1,100? 3.79% What is the yield to maturity of a bond with a par value of $1,000, a coupon rate of 7% with annual payments, and 9 years to maturity if the bond sells for $1,100? 5.56% The risk that the currency in which a bond is denominated may decline versus the bondholder's home currency is referred to as: Current risk A YTM for a semiannual coupon bond is calculated by taking the semiannual rate and multiplying it by two. Is the YTM for a semiannual bond an APR or EAR? APR = rate per period x number of periods per year