7. Two years ago, an investor paid S1,000 (Par Value) for a 10-year bond yieldin

Question

7. Two years ago, an investor paid S1,000 (Par Value) for a 10-year bond yielding 10%(Coupon Rate) at that time. Today, two years later, market interest rates are 7%. As such, the current market price of the bond is $1,000. A, greater than B. equal to C. less than Considering the same bond described in Question # 7, the investor who bought the bond two years ago would get semi-annual interest payments of 8 today, two years later A. $35 B. S50 C. $70 D. S 100 Assume you have a "bond portfolio". One of the basic relationships in "interest rate things held constant, for a given change in market interest rates, the 9, the "time to maturity"& the the change in the bond's price. This is the concept of"duration the "coupon rate", the A. longer... smaller...less B. longer... larger...greater C. longer...smaller...greater D. shorter... smaller... less 10. Investors' Expected Rate of Return for a Common Stock consists of the (expected plus the expected ) divided by ( ) X 100 (= expected % Return On Investment). Market Risk Premium x Beta Coefficient... Current Market Stock Price B. Dividend Yield... Capital Gains Yield..Change in Market Stock Price over the holding period C. Earnings Per Share Growth Rate (G")... "Gx Current Market Stock Price... Initial Stock Price D. S$$ Dividend Payments...S$S Capital Gains..Initial Stock Price (S$S price paid by the investor) 11. (3 points) SM Corporation issued a new series of 20-ycar bonds on January 1, 2000, at $1, 000, with a 10 % Coupon Rate, that mature on January 1, 2020 (Maturity Date). Coupon Payments are made semi-annually on June 30 and December 31 of each year. What is the current market price/value of these bonds on January 1, 2006, six(6)vearslater, if the gment marketinterestrate is now 7 %? A. $1,407.78 B. $1,265.01 C. $ 1,146.51 D. S 1,000.00 (the Par Value 2. Considering the same bond described in Question # i , what is the Current ield on January , 2006? A. 10.00 % (the Coupon Rate) B. 791% C. 7.10% D. 7.00 % (the current market interest rate) 13.0 points) Fiddler Con any's bonds have a S1 000 Par Value, a 7 % Co po Rate paid semi annua v and mature in 10 years. These bonds have a curent markst price of s 922. What is the "Yield To Maturity" (YTM)? A. 3.50 % (the semi-annual Coupon Rate) B. 7.00 % (the Coupon Rate) C. 744 % D 8.16%

Explanation / Answer

Part 1

A basic property of bond is that its varies with price as the required yield decreases present value of cash flow increases and vies versa so in this case with decrease in yield current market price will be greater than 1000.

Part 2

Semi annual payment will be coupon rate/2

=100/2

=50

Part 3

C=longer smaller greater. The bond with longer maturity date with lower coupon rate had greater change in bond price

Part 4

D. Expected dividend payment+ expected capital gain/initial stock price×100

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