1. Suppose a bond that has semiannual coupons is selling for $10,500. It has 7 years left until maturity. Its par value is $10,000 and its YTM is 7%. What is this bond’s annual coupon rate?

2. If the bank paid me 9.98% interest per year and if my actual return (the increase in my purchasing power) was only 5.25%, what was the inflation rate during the year?

3. Suppose a bond with a 10% coupon rate and semiannual coupons, has a face value of $1,000, 20 years to maturity and is selling for $900. What is the yield to maturity?

4. If we require a 10% real return and we expect inflation to be 8%, what is the nominal rate?

5. What should be the price of a bond that has a 14% coupon rate (semiannual payments), par value = $1,000, YTM = 16%, and will mature 7 years from today?

6. For an investor who plans to purchase a bond maturing in one year, the primary consideration should be ________.

A) retained earnings

B) face value

C) yield to maturity

D) net income

7. A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for ________ today.

8. A firm has an issue of $1,000 par value bonds with a 9 percent stated interest rate outstanding. The issue pays interest annually and has 20 years remaining to its maturity date. If bonds of similar risk are currently earning 11 percent, the firm's bond will sell for ________ today.

9. A bond with short maturity has less "interest rate risk" than a bond with long maturity when all other features—coupon interest rate, par value, and interest payment frequency—are the same.

TRUE             FALSE

10. There is a semiannual coupon bond with the following info. What is this bond’s coupon rate?

 Note: YTM and coupon rates are always annual.

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