Answer the following m.c.q immediately with workings

QUESTION 4

1. Exxon issues a perpetual bond that promises to pay 6% interest per year. What is the price of a 1000 face value bond if the yield to maturity is 12%?

		$500.00
		$583.33
		$545.50
		$600
		$700

QUESTION 7

1. If the expected inflation rate is 7% and the real rate is 1%, what should be the nominal rate of a risk-free government bond?

		8.12%
		9.18%
		9.14%
		10.21%
		8.07%

10 points

QUESTION 8

An investor purchases at the beginning of the year a 5-year IBM bond paying a coupon of 6% and yielding 6.5%. She sells it at the end of the year when the yield had decreased to 5%. What is her one year rate of return?

Old Price $957.88 New Price $900.64 ROR -5.98%

Old Price $1,000.00 New Price $933.76 ROR -6.62%

Old Price	$979.22
New Price	$1,035.46		ROR	5.74%

Old Price	$1,043.29
New Price	$1,089.04		ROR	4.38%

Old Price	$848.37
New Price	$933.76		ROR	10.07%