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Multiple Choice

4. You wish to purchase a 20-year, $1,000 face value bond that makes semiannual interest payments of $40. If you require a 10% nominal yield to maturity, what price should you be willing to pay for the bond?
$619
$674
$761
$828
$902

5. Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease by 1%?

20-year, zero coupon bond.

10-year, zero coupon bond.

20-year, 10% coupon bond.

20-year, 5% coupon bond.

1-year, 10% coupon bond.

6. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds?

Market interest rates decline sharply.

The company's bonds are downgraded.

Market interest rates rise sharply.

Inflation increases significantly.

The company's financial situation deteriorates significantly.

Solution Preview

Please see the attached file.

4. You wish to purchase a 20-year, $1,000 face value bond that makes semiannual
interest payments of $40. If you require a 10% nominal yield to maturity, what price
should you be willing to pay for the bond?
$619
$674
$761
$828
$902

The price is the present value of interest and principal. Use the PV function to
calculate the ...

Solution Summary

The solution explains some multiple choice questions relating to bonds

$2.19