bond valuation exam questions and answers pdf

Overview of Business Valuation Question 1 What do you understand by valuation and why there is a need for valuation? Similarly, a price of $969.75 implies a current yield of Given (1 ) 0.5889+= i − n From there, we go on to discuss bond features and how bonds are bought and sold. Answers to Self-Test Questions ST4-1. We begin by showing how the techniques we developed in Chapters 5 and 6 can be applied to bond valuation. A. Chapter 6: Valuing Bonds . Fundamental question: How we determine the value of (or return on) a bond? If the YTM suddenly rises to 9 percent: As interest rates fluctuate, the value of a Treasury security will fluctuate. Both bonds sell at par, so the initial YTM on both bonds is the coupon rate, 7 percent. (iii) The present value of the redemption value is 381.50. True False True False 55. Answer Valuation is a process of appraisal or determination of the value of certain assets: tangible or intangible, securities, liabilities and a specific business as a going concern or any Bond Valuation Practice Problems. It will repay its face value of N$100 at the end of 15 years. $3,917.63 B. You have decided to invest in Bond X, an . All else the same, the Treasury security will have lower coupons because of its lower default risk, so One Valuation of Bonds & Shares - MCQs with answers 1. the coupon rate on an ordinary bond, which is expressed in nominal terms, must be higher than the coupon rate on a TIPS, which is expressed in real terms. Chapter 6: Valuing Bonds -1 . (ii) The ratio of the semi-annual coupon rate, r, to the desired semi-annual yield rate, i, is 1.03125. 6.1 Bond Cash Flows, Prices and Yields A. PV of a lump sum Answer: c EASY N 3 I/YR 4% PV $889.00 PMT $0 FV-$1,000.00 iii. A 5-year bond pays interest annually. Other similar bonds have a yield to maturity (YTM) of 12%. INTEREST RATES AND BOND VALUATION Answers to Concept Questions 1. Question 2 . i. FV of a lump sum Answer: e EASY N 10 I/YR 8% PV-$100.00 PMT $0.00 FV $215.89 ii. The value of a bond and debenture is a) Present value of interest payments it gets b) Present value of contractual payments it gets till maturity c) Present value of redemption amount d) None of the above View Answer / Hide Answer 15. If the bond is priced to yield 8%, what is the bond's value today? the purchaser would receive the par value plus the coupon payment immediately. This is because we calculate the clean price of the bond. Question 1 . The $1,000 face value ABC bond has a coupon rate of 6%, with interest paid semi-annually, and matures in 5 years. 2. OUR GOAL in this chapter is to introduce you to bonds. A bond's current yield is its annual coupon payment divided by its current market price: Current yield = Annual coupon / Bond price [2] For example, suppose a $1,000 par value bond paying an $80 annual coupon has a price of $1,032.25. Long-term Treasury securities have substantial interest rate risk. FV = $1,000 CF = $60/2 = $30 N = 5 x 2 = 10 i … No. $3,917.00 C. $3,918.63 D. $3,918.00 True False True False 50. In which city are coins made? A. Saint Louis B. Philadelphia C. You are asked to put a price on a bond with a coupon rate of 8%. Supplement to Text . Interest rate on a simple lump sum investment Answer: e EASY n-year bond with semi-annual coupons and the following characteristics: (i) Par value is 1000. The par value is … Any bond that sells at par has a YTM equal to the coupon rate. The current yield is $80 / $1,032.25 = 7.75%. True False Essay Questions Chapter 02 Time Value of Money Answer Key Multiple Choice Questions 1. Bond valuation questions .

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