bond valuation exam questions and answers pdf

2. The $1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. True False Essay Questions Chapter 02 Time Value of Money Answer Key Multiple Choice Questions 1. n-year bond with semi-annual coupons and the following characteristics: (i) Par value is 1000. Fundamental question: How we determine the value of (or return on) a bond? Answer Valuation is a process of appraisal or determination of the value of certain assets: tangible or intangible, securities, liabilities and a specific business as a going concern or any Chapter 6: Valuing Bonds . You have decided to invest in Bond X, an . PV of a lump sum Answer: c EASY N 3 I/YR 4% PV $889.00 PMT $0 FV-$1,000.00 iii. A. Saint Louis B. Philadelphia C. $3,917.00 C. $3,918.63 D. $3,918.00 True False True False 50. You are asked to put a price on a bond with a coupon rate of 8%. As interest rates fluctuate, the value of a Treasury security will fluctuate. We begin by showing how the techniques we developed in Chapters 5 and 6 can be applied to bond valuation. In which city are coins made? (iii) The present value of the redemption value is 381.50. the purchaser would receive the par value plus the coupon payment immediately. Long-term Treasury securities have substantial interest rate risk. Similarly, a price of $969.75 implies a current yield of Interest rate on a simple lump sum investment Answer: e EASY The value of a bond and debenture is a) Present value of interest payments it gets b) Present value of contractual payments it gets till maturity c) Present value of redemption amount d) None of the above View Answer / Hide Answer i. FV of a lump sum Answer: e EASY N 10 I/YR 8% PV-$100.00 PMT $0.00 FV $215.89 ii. $3,917.63 B. Answers to Self-Test Questions ST4-1. Bond Valuation Practice Problems. Any bond that sells at par has a YTM equal to the coupon rate. It will repay its face value of N$100 at the end of 15 years. Both bonds sell at par, so the initial YTM on both bonds is the coupon rate, 7 percent. 6.1 Bond Cash Flows, Prices and Yields A. Chapter 6: Valuing Bonds -1 . A bond's current yield is its annual coupon payment divided by its current market price: Current yield = Annual coupon / Bond price [2] For example, suppose a $1,000 par value bond paying an $80 annual coupon has a price of $1,032.25. Supplement to Text . The par value is … Overview of Business Valuation Question 1 What do you understand by valuation and why there is a need for valuation? True False True False 55. FV = $1,000 CF = $60/2 = $30 N = 5 x 2 = 10 i … A 5-year bond pays interest annually. Bond valuation questions . From there, we go on to discuss bond features and how bonds are bought and sold. All else the same, the Treasury security will have lower coupons because of its lower default risk, so If the bond is priced to yield 8%, what is the bond's value today? Question 1 . Valuation of Bonds & Shares - MCQs with answers 1. A. The current yield is $80 / $1,032.25 = 7.75%. Given (1 ) 0.5889+= i − n the coupon rate on an ordinary bond, which is expressed in nominal terms, must be higher than the coupon rate on a TIPS, which is expressed in real terms. 15. No. (ii) The ratio of the semi-annual coupon rate, r, to the desired semi-annual yield rate, i, is 1.03125. If the YTM suddenly rises to 9 percent: One Other similar bonds have a yield to maturity (YTM) of 12%. OUR GOAL in this chapter is to introduce you to bonds. This is because we calculate the clean price of the bond. INTEREST RATES AND BOND VALUATION Answers to Concept Questions 1. Question 2 .

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