1. A bond\'s coupon rate is equal to the monthly-after tax interest divided by w
ID: 2726687 • Letter: 1
Question
1. A bond's coupon rate is equal to the monthly-after tax interest divided by which one of the following?
A. call price
B. current price
C. face value
D. clean price
E. none of the above
2. Oil Well Supply offers 7.5 percent coupon bonds with quarterly payments and a yield to maturity of 8 percent. The bonds mature in 6 years. What is the market price per bond if the face value is $1,000?
A. $989.70
B. $976.54
C. $986.48
D. $976.36
E. $1,013.48
3. Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments. The yield to maturity is 10 percent and the maturity date is 12 years from today. What is the market price of this bond if the face value is $1,000?
A. $967.52
B. $996.67
C. $941.20
D. $965.93
E. $953.30
4. Miller Brothers Hardware paid an annual dividend of $0.95 per share in the coming month. Today, the company announced that future dividends will be increasing by 2.6 percent annually. If you require a 13 percent rate of return, how much are you willing to pay to purchase one share of this stock today?
A. $9.13
B. $9.37
C. $9.77
D. $9.72
E. $9.00
Explanation / Answer
Answer: 1 C. face value
Answer: 2 D. $976.36
Market Price=$18.75*PVIFA(2%,24)+$1000*PVIF(2%,24)
=354.66+621.7
=$976.36
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