Finance : Suppose the real rate is 7.34% and the inflation rate

Finance : Suppose the real rate is 7.34% and the inflation rate

Subject: Business    / Finance
Question
Question 1

Suppose the real rate is 7.34% and the inflation rate is 5.73%. Solve for the nominal rate. Use the Fisher Effect formula.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 2

Suppose the real rate is 3.17% and the nominal rate is 11.4%. Solve for the inflation rate. Use the Fisher Effect equation.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 3

Suppose the nominal rate is 9.58% and the inflation rate is 3.15%. Solve for the real rate. Use the Fisher Effect formula.

Note: Enter your answer in percentages rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 4

ABC wants to issue 23-year, zero coupon bonds that yield 10.25 percent. What price should they charge for these bonds if they have a par value of $1,000? That is, solve for PV. Assume annual compounding.

Hint: zero coupon bonds means PMT = 0

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points
Question 5

A premium bond is a bond that:

has a market price which exceeds the face value.

is callable within 12 months or less.

is selling for less than par value.

has a face value in excess of $1,000.

has a par value which exceeds the face value.

1 points
Question 6

The yield to maturity on a Marshall Co. premium bond is 7.6 percent. This is the:

nominal rate.

effective rate.

real rate.

current yield.

coupon rate.

1 points
Question 7

Stealers Wheel Software has 5.22% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 103.44% of par. What is the current yield?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 8

The 12.88 percent coupon bonds of the Peterson Co. are selling for $808.74. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent.

Enter your answer in percentages rounded off to two decimal points.

1 points
Question 9

ABC has issued a bond with the following characteristics:

Par: $1,000; Time to maturity: 9 years; Coupon rate: 5%;

Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 7.15%

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points
Question 10

The 7.81 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $855.84. What is the current yield?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 11

ABC Corp. issued 15-year bonds 2 years ago at a coupon rate of 10.6%. The bonds make semi-annual payments. If these bonds currently sell for 97% of par value, what is the YTM?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 12

The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _____ percent.

1 points
Question 13

ABC’s Inc.’s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 14

You paid $1,016 for a corporate bond that has a 10.3% coupon rate. What is the current yield?

Hint: if nothing is mentioned, then assume par value = $1,000

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 15

Assume that you wish to purchase a 17-year bond that has a maturity value of $1,000 and a coupon interest rate of 7%, paid semiannually. If you require a 6.48% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points
Question 16

ABC Inc., has $1,000 face value bonds outstanding. These bonds mature in 3 years, and have a 6.5 percent coupon. The current price is quoted at 98.59 percent of par value. Assume semi-annual payments. What is the yield to maturity?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 17

ABC has issued a bond with the following characteristics:

Par: $1,000; Time to maturity: 16 years; Coupon rate: 7%;

Assume annual coupon payments. Calculate the price of this bond if the YTM is 9.05%

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points
Question 18

A firm’s bonds have maturity of 10 years with a $1000 face value, an 8% semi-annual coupon, are callable in 5 years, at $1,050, and currently sells at a price of $1,100. What is the yield to call (YTC)?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 19

A bond which sells for less than the face value is called a:

debenture.

perpetuity.

par value bond.

discount bond.

premium bond.

1 points
Question 20

A discount bond has a yield to maturity that:

exceeds the coupon rate.

equals zero.

is equal to the current yield.

is less than the coupon rate.

equals the bond’s coupon rate.

1 points
Question 21

The rate required in the market on a bond is called the:

current yield

liquidity premium

risk premium

call yield

yield to maturity

1 points
Question 22

BCD’s $1,000 par value bonds currently sell for $798.40. The coupon rate is 10%, paid semi-annually. If the bonds have 5 years to maturity, what is the yield to maturity?

Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.

1 points
Question 23

The principal amount of a bond that is repaid at the end of term is called the par value or the:

discount amount

back-end amount

coupon

face value

coupon rate
1 points
Question 24

ABC has issued a bond with the following characteristics:

Par: $1,000; Time to maturity: 15 years; Coupon rate: 11%;

Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 5.98%

Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.

1 points
Question 25

ABC’s bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 8 years. What is the yield to maturity?

1 points