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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.

Market interest rates rise sharply.

Inflation increases significantly.

The company's financial situation deteriorates significantly.

#### Solution Preview

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