Reference no: EM131049700
A bond with an 11% coupon is issued at its face value of $1,000. What will the bond's value be if the required return of bond investors immediately increased to 14% if the bond had an original maturity of 1 year? 20 years?
a. They would each decline about $100 in value.
b. $973.68 and $801.31, respectively, for a one year and 20 year bond.
c. $1,000.00 and $1,000.00, respectively, for a one year and 20 year bond.
d. $972.88 and $800.02, respectively for a one year and 20 year bond.
Bond financing is best characterized as _______ amortization borrowing.
a. Full
b. Partial
c. Zero
d. Negative
In how many years will a bond mature, given its current price of $948, face value of $1,000, coupon of 8.5%, and required return of 10.3%?
a. 3.52 years
b. 10.1 years
c. 7.03 years
d. 4.1 years
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