PRINCIPLES OF CORPORATE FINANCE EXAM SCRIPT QUESTIONS AND ANSWERS COMPLETE PRACTICE RESOURCE VERIFIED

PRINCIPLES OF CORPORATE FINANCE
EXAM SCRIPT QUESTIONS AND ANSWERS
COMPLETE PRACTICE RESOURCE
VERIFIED

●● coupon rate
Answer: -set by issuer and stated on the bond certificate


-expressed as an APR so amount is


cpn= (coupon rateXface value)/(# of cpn payments per year)


●● zero coupon bonds
Answer: -2 cash flows


-bonds market price at time of purchase
-bonds face value at maturity


-treasury bills are zero coupon US gov bonds with maturity up to one
year


-always trade at a discount

, ●● yield to maturity of a zero coupon bond
Answer: -discount rate that sets the present value of the promised bond
payments equal to the current market price of the bond


1+YTMn= [face value/price]^1/n


●● Why is there a negative relation between maturity and bond price?
Answer: longer maturity=lower price


shorter maturity=higher price


●● coupon bonds
Answer: -pay FV at maturity
-make regular payemnts


-two types of US treasury coupon securities
1)notes
2)bonds


-return on coupon bonds = purchase price - principle value