5,000

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. Which of the following $5,000 face-value securities has the highest yield to maturity?

 

A) 

A 6 percent coupon bond selling for $5,000                 
 

B) 

A 6 percent coupon bond selling for $4,500

 

C) 

A 10 percent coupon bond selling for $5,000
 

D) 

A 10 percent coupon bond selling for $4,500

 

2. The current interest rate on a 10-year treasury note (with face value = $100 and annual coupon rate = 2.625%) is 3.37%.  If the price of this treasury note goes up, its ____. (There are more than one answer.)

 

coupon rate drops below 2.625%.

 

coupon rate rises above 2.625%.

 

interest rate drops below 3.37.%.

 

interest rate rises above 3.37%.

 

interest rate does not change.

 

coupon rate does not change.

3. A two-year bond with $1,000 face-value and 10% coupon rate is sold for $1,000 today (Year 1).  If one year later (Year 2) the market interest rate increases by 5%, then this bond will have a market price of $ _____ (round UP the nearest integer) next year (Year 2).

 
Expert Solution
Step 1

Introduction:

The highest yield to maturity from a bond is possible when the bond is held up to maturity. Holding a  bond up to maturity means when the face value of the bond is paid & also when the bond agreement comes to an end.

 

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Thanks for the questions. As per Bartleby answering guidelines we can answer only the first question if there are multiple questions. Please post rest of the questions separately. Thank You.

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