chapter 6 quiz finance

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 27 years to maturity, and a coupon rate of 3.6 percent paid annually. If the yield to maturity is 3.2 percent, what is the current price of the bond in euros?

€ 1,071.60

A Japanese company has a bond outstanding that sells for 96.318 percent of its ¥100,000 par value. The bond has a coupon rate of 3.4 percent paid annually and matures in 16 years. What is the yield to maturity of this bond?

3.71%

Westco Co. issued 15-year bonds a year ago at a coupon rate of 5.4 percent. The bonds make semiannual payments and have a par value of $1,000. If the YTM on these bonds is 4.5 percent, what is the current price of the bond in dollars?

$1,092.74

Ashburn Corp. issued 25-year bonds two years ago at a coupon rate of 5.6 percent. The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM?

5.84%

If Treasury bills are currently paying 4.6 percent and the inflation rate is 1.9 percent, what is the approximate real rate of interest? The exact real rate?

aprrox real rate: 2.70%
exact real rate: 2.65%

Suppose the real rate is 1.8 percent and the inflation rate is 2.7 percent. What rate would you expect to see on a Treasury bill?

4.55%

An investment offers a total return of 11.7 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 9 percent. What does Janice believe the inflation rate will be over the next year?

2.48%

Say you own an asset that had a total return last year of 14.1 percent. If the inflation rate last year was 2.83 percent, what was your real return?

10.96%

You find a zero coupon bond with a par value of $10,000 and 24 years to maturity. If the yield to maturity on this bond is 4.2 percent, what is the dollar price of the bond? Assume semiannual compounding periods.

$3,687.77

Nog, Inc., has a bond outstanding with a par value of $1,000, 17 years to maturity, and a coupon rate of 4.4 percent paid semiannually. If the YTM on the bond is 4.9 percent, what is the price of the bond in dollars?

$942.77