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Homework answers / question archive / UnansweredQuestion 1 0 / 1 pts A discount bond is a bond in which its present value is greater than its face value
UnansweredQuestion 1
0 / 1 pts
A discount bond is a bond in which its present value is greater than its face value.
True
False
0 / 1 pts
The supply of loanable funds is a term describing the total net demand for financial capital by users.
True
False
0 / 1 pts
The Humphrey-Hawkins Act revised and supplemented the original reasons and goals of the Federal Reserve System.
True
False
0 / 1 pts
Primary markets trade financial instruments once they are issued.
True
False
0 / 1 pts
ERM recognizes the importance of managing the combined impact of the full spectrum of risks as an interrelated risk portfolio.
True
False
0 / 1 pts
An increase in wealth of financial market participants will cause, at every interest rate, the supply curve to shift down and to the right.
True
False
0 / 1 pts
The required return rate is the interest rate used to calculate the annual cash flow a bond issuer promises to pay investors.
True
False
0 / 1 pts
The Federal Reserve System consists of 9 FRBs located in major U.S. cities.
True
False
0 / 1 pts
In a direct transfer a corporation sells its stock or debt directly to investors without going through a financial institution.
True
False
0 / 1 pts
Default risk is the risk that a security cannot be sold at a predictable price with low transaction costs at short notice.
True
False
0 / 10 pts
Why is the Treasury Department issuing twenty-year bonds later this year?
Your Answer:
0 / 16 pts
You are considering purchasing a corporate bond that has an expected rate of return of 10%, 5% coupon rate (paid annually), a $1,000 par value, and has 3 years until maturity. Based on your projections, you will be able to sell the bond at the end of Year 3 for $1100. Calculate the current market price of the bond.
Your Answer:
0 / 16 pts
A bond you are evaluating, but have not purchased, has a 10% coupon rate (paid annually), a $1,000 par value, and is 5 years from maturity. You feel that you will be able to sell the bond at the end of Year 5 for $950. If the required rate of return on the bond is 5%, what is its present value?
Your Answer:
13 / 16 pts
DAH, Inc., has issued a 12% bond that is to mature in 9 years. The bond had a $1,000 par value and interest is due to be paid semi-annually. If your required rate of return is 10%, what price would you be willing to pay for the bond? (13 points) State whether the bond is selling at a premium or at a discount. (3 points)
Your Answer:
16 / 16 pts
Your client purchased a corporate bond that had a 5% coupon rate (paid annually), a $1,000 par value, and 4 years until maturity. Your client sold the bond at the end of Year 4 for $1200. Your client had a realized rate of return on the investment of 12%. Calculate the current market price of the bond.
Your Answer:
16 / 16 pts
Calculate the value of a bond that is expected to mature in 13 years with a $1,000 face value. The interest coupon rate is 8%, and the required rate of return is 10%. Interest is paid annually. (13 points) State whether the bond is selling at a premium or at a discount. (3 points)
Your Answer:
UnansweredQuestion 1
0 / 1 pts
A discount bond is a bond in which its present value is greater than its face value.
True
Correct Answer
False
0 / 1 pts
The supply of loanable funds is a term describing the total net demand for financial capital by users.
True
Correct Answer
False
0 / 1 pts
The Humphrey-Hawkins Act revised and supplemented the original reasons and goals of the Federal Reserve System.
Correct Answer
True
False
0 / 1 pts
Primary markets trade financial instruments once they are issued.
True
Correct Answer
False
0 / 1 pts
ERM recognizes the importance of managing the combined impact of the full spectrum of risks as an interrelated risk portfolio.
Correct Answer
True
False
0 / 1 pts
An increase in wealth of financial market participants will cause, at every interest rate, the supply curve to shift down and to the right.
Correct Answer
True
False
0 / 1 pts
The required return rate is the interest rate used to calculate the annual cash flow a bond issuer promises to pay investors.
True
Correct Answer
False
0 / 1 pts
The Federal Reserve System consists of 9 FRBs located in major U.S. cities.
True
Correct Answer
False
0 / 1 pts
In a direct transfer a corporation sells its stock or debt directly to investors without going through a financial institution.
Correct Answer
True
False
0 / 1 pts
Default risk is the risk that a security cannot be sold at a predictable price with low transaction costs at short notice.
True
Correct Answer
False
0 / 10 pts
Why is the Treasury Department issuing twenty-year bonds later this year?
Your Answer:
See Chapter 2, "Twenty-year T-Bonds"
0 / 16 pts
You are considering purchasing a corporate bond that has an expected rate of return of 10%, 5% coupon rate (paid annually), a $1,000 par value, and has 3 years until maturity. Based on your projections, you will be able to sell the bond at the end of Year 3 for $1100. Calculate the current market price of the bond.
Your Answer:
0 / 16 pts
A bond you are evaluating, but have not purchased, has a 10% coupon rate (paid annually), a $1,000 par value, and is 5 years from maturity. You feel that you will be able to sell the bond at the end of Year 5 for $950. If the required rate of return on the bond is 5%, what is its present value?
Your Answer:
13 / 16 pts
DAH, Inc., has issued a 12% bond that is to mature in 9 years. The bond had a $1,000 par value and interest is due to be paid semi-annually. If your required rate of return is 10%, what price would you be willing to pay for the bond? (13 points) State whether the bond is selling at a premium or at a discount. (3 points)
Your Answer:
answer:
v= 60(11.69)+ 1000(.416)
v=701.40+416.00
v=1,117.40
16 / 16 pts
Your client purchased a corporate bond that had a 5% coupon rate (paid annually), a $1,000 par value, and 4 years until maturity. Your client sold the bond at the end of Year 4 for $1200. Your client had a realized rate of return on the investment of 12%. Calculate the current market price of the bond.
Your Answer:
face value=$1,000
annual coupon rate=5.00%
annual coupon=5.00%*$1,000
annual coupon=$50
holding period=4yrs
realized return=$1,200
purchase price= $50*PVIFA(12%,4)+$1,200* PVIF(12%,4)
purchase price=$50*(1-(1/1.12)^4)/0.12+$1,200/1.12^4
purchase price=$50*3.037349+$1,200*0.635518
Purchase price=$914.49
current market price of the bond is $914.49
16 / 16 pts
Calculate the value of a bond that is expected to mature in 13 years with a $1,000 face value. The interest coupon rate is 8%, and the required rate of return is 10%. Interest is paid annually. (13 points) State whether the bond is selling at a premium or at a discount. (3 points)
Your Answer:
answer:
v=pv of interest payments as an annuity +pv of maturity value
v=568.27+289.66
v=$857.93
