3. How often do bondholders holding coupon-paying corporate bonds get interest p

Question

3. How often do bondholders holding coupon-paying corporate bonds get interest payments over the life of the bond? a. Once per year b. Twice per year c. Four times per year d. Monthly trying to determine a bond's a. Inflation Premium b. Maturity Risk Premium c. Liquidity Premium d. Default Risk Premium 5. You wish to buy a S15,000 dining room set. The furniture store offers you a 3-year loan with a 10 percent nominal rate. What are the monthly payments? a. $359.01 b. $416.67 c. $480.01 d. $484.01 6. On the balance sheet, bonds are a. A form of assets. b. A form of liability c. A form of equity.

Explanation / Answer

3.) Corporate bonds usually pay interest or coupons twice a year to their investors. Though the coupon rate is mentioned annually but the coupon frequency is usually 2.

Hence, Option-(b) is correct

4.) If you are reserching a bonds rating, you are determining the bonds default risk premium. Credit agencies usually do research on bonds before the issue and assign them rating based on their credit default risk. They categorize these bonds based on these ratings into Investment grade or junk bonds.

Hence, Option-(d) is correct

5.) Cost of Dining Set=$15,000

Interest Rate =10% or 0.83% per month

Term = 3 years

Monthly Payment =PMT(0.0083, 36, 15000) =$484.01

Hence, Option-(d) is correct.

6.) On a balance sheet, bond is form of liability.This is because the corporation must pay back to its bondholders when the maturity arrives. So, it is sort of a loan which is to be repaid after certain time.

Hence, Option-(b) is correct

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