18. WidgetMaker bonds with 5 full years remaining to maturity, a $1,000 par valu
ID: 1097901 • Letter: 1
Question
18. WidgetMaker bonds with 5 full years remaining to maturity, a $1,000 par value, a 6% annual
coupon rate, and semiannual interest payments can be purchased today for $874. What is the
semi-annual Yield to Maturity?
a. 3.4%
b. 5.2%
c. 4.6%
d. 6.3%
19. Ford bonds with 7 full years remaining to maturity, $1,000 par value, 10% annual coupon
rate, and semi-annual interest payments can be purchased today for $1,077. What is the
nominal semi-annual Current Yield?
a. 7.2%
b. 4.6%
c. 5.1%
a. 9.3%
20. Suppose Harrington Corp. stock can be purchased today, December 17, 2013, for $45 per
share. You purchase a call option on 100 Harrington shares today for $5 per share with a strike
price of $50 per share and expiration date one year from today. If on December 17, 2014, the
price of Harrington shares goes up to $80 per share, how much profit, if any, do you make by
exercising this option at that time? (Include the option premium but neglect the time value of
money.)
a. $2,500
b. $600
c. $3,000
d. Loss of $2,500
21. Which of the following do not affect the price of a stock?
a. Assets of the company
b. Competition
c. Market conditions
d. All the above affect the price
Explanation / Answer
18) d. 6.3%
19) b. 4.6%
20) b. $600
21) d. All the above affect the price
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