Quiz 6 - Purdue University



Quiz 6

1. Bond 20 is a 20 year bond 1000 par value bond bearing a 5% coupon rate payable semi-annually and redeemable for 1100 is bought to yield 7% convertible semi-annually.

Bond 10 is a 10 year bond 1000 par value bond bearing a 5% coupon rate payable semi-annually and redeemable for 1100 is bought to yield 7% convertible semi-annually.

Calculate Price of Bond 10 less the Price of Bond 20.

(A) -121.42

(B) -96.42

(C) 0.00

(D) 96.42

(E) 121.42

2. A 10 year bond with a 10,000 par value bearing a 5% coupon annual coupon and redeemable at par is bought at a premium to yield 4% annually. The price of the bond was 10,811.09.

Calculate the Book Value immediately after the 7th coupon was paid.

(A) 10,362.99

(B) 10,320.25

(C) 10,277.51

(D) 10,233.06

(E) 10,188.61

3. A 10 year bond with semi-annual coupons is bought at a discount to yield 6% convertible semi-annually. The Book Value immediately after the 5th coupon is 90,000. A is the flat price calculated 2 months later using the Theoretical Method while B is the flat price using the practical method.

Calculate (A – B).

(A) -12

(B) -9

(C) 0

(D) 9

(E) 12

4. A 10 year bond with a 1000 par value pays annual coupons of 50 and is redeemable at par. Audrey purchases the bond for 1100.

Calculate Audrey’s yield to maturity on the bond.

(A) 3.78%

(B) 4.02%

(C) 4.25%

(D) 4.47%

(E) 4.72%

5. A 15 year bond with a par value of 1000 has a 7% coupon rate payable semi-annually. The redemption value of the bond is 1000. The bond can also be called at the end of 10 years, 12 years and 14 years for 1000. Calculate the price that an investor should pay to yield 5% convertible semi-annually.

(A) 1143.53

(B) 1155.89

(C) 1178.85

(D) 1199.64

(E) 1209.30

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