BSNS114 Topic 4 Exam Study Guide
the rate required in the market on a bond is called the - Answer Yield to maturity
calculate the price of a bond if the Face value is $1000, the annual coupon rate is 9%,
the bond matures in 13 years and the YTM is 7% - Answer C = Face value/ coupon rate
= 1000/0.09 = 90
r = YTM
(90/0.07)x(1-1/(1+0.07)^13)+1000/(1+0.07)^13
=$1167.15
Bonds A and B both have a face value of $1,000. Bond A pays a 7% coupon, Bond B pays
a 9% coupon. If the YTM on Bond A is 8% and the YTM on Bond B is 10% what do both
bonds trade at? - Answer both bonds trade at a discount
is a BBB rated bond, an investment grade rating? - Answer yes
do higher coupon rate bonds have more interest rate risk than lower coupon rate bonds
- Answer no
Otago Trust Corporation issued bonds 5 years ago with a 20 year maturity. The issue
has a coupon rate of 6% p.a. Coupons are paid semi-annually. If the YTM on this issue is
currently 7% p.a. calculate the price of these bonds assuming a face value of $1,000. -
Answer C = 1000x0.06 = 60
semi annually = 60/2 = 30
YTM = 7%/2 =3.5%
t = 15x2 =30
=$908.04
Bond X has 7% coupons, these are paid half-yearly. The bond has a $1,000 face value
and is priced at par value. Bond X has 10 years to maturity. If interest rates suddenly
rise by 1.5% p.a. what is the change in price of Bond X? - Answer -$99.71
what is one characteristic of a bond? - Answer Fixed maturity and senior claim on the
assets of the business
what is generally a characteristic of a government bond? - Answer Fixed coupon
payments and zero default risk
A corporation is about to choose the features of a new bond. They need to choose the
the rate required in the market on a bond is called the - Answer Yield to maturity
calculate the price of a bond if the Face value is $1000, the annual coupon rate is 9%,
the bond matures in 13 years and the YTM is 7% - Answer C = Face value/ coupon rate
= 1000/0.09 = 90
r = YTM
(90/0.07)x(1-1/(1+0.07)^13)+1000/(1+0.07)^13
=$1167.15
Bonds A and B both have a face value of $1,000. Bond A pays a 7% coupon, Bond B pays
a 9% coupon. If the YTM on Bond A is 8% and the YTM on Bond B is 10% what do both
bonds trade at? - Answer both bonds trade at a discount
is a BBB rated bond, an investment grade rating? - Answer yes
do higher coupon rate bonds have more interest rate risk than lower coupon rate bonds
- Answer no
Otago Trust Corporation issued bonds 5 years ago with a 20 year maturity. The issue
has a coupon rate of 6% p.a. Coupons are paid semi-annually. If the YTM on this issue is
currently 7% p.a. calculate the price of these bonds assuming a face value of $1,000. -
Answer C = 1000x0.06 = 60
semi annually = 60/2 = 30
YTM = 7%/2 =3.5%
t = 15x2 =30
=$908.04
Bond X has 7% coupons, these are paid half-yearly. The bond has a $1,000 face value
and is priced at par value. Bond X has 10 years to maturity. If interest rates suddenly
rise by 1.5% p.a. what is the change in price of Bond X? - Answer -$99.71
what is one characteristic of a bond? - Answer Fixed maturity and senior claim on the
assets of the business
what is generally a characteristic of a government bond? - Answer Fixed coupon
payments and zero default risk
A corporation is about to choose the features of a new bond. They need to choose the
