Reference no: EM133121053
1. A zero-coupon bond matures in 15 years. At a market discount rate of 2.4% per year and assuming annual compounding, the price of the bond per 100 of par value is closest to:
a. 70.06
b. 142.72
c. 0 since it's a zero-coupon bond
d. 100
2. Assume you are a firm with unstable earnings streams. From an issuer's perspective, which of the following is a disadvantage of using bonds to finance the company?
a. Bondholders do not participate in extraordinary profits; the payments are limited to interest
b. Bondholders do not have voting rights
c. Flotation costs of bonds are generally lower than those of equity securities
d. Debt generally produces fixed charges , increasing the firm's financial leverage
3. Consider this bond: 20-year bond with a 10% coupon rate and a par or maturity value of $1,000 (semiannual interest payments). Which of the following cash flows is/are equivalent to an ordinary annuity? *
a. Semi annual coupon (interest) payments
b. Par/Maturity value
c. Both
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