The nominal rate of risk-free government bond

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Reference no: EM132074092

1. What is the price of a 10-year bond that pay 6% coupon and the yield to maturity is 8%? Show equation and work.

a. $865.80

b. $929.76

c. $1,073.60

d. $932.90

e. $1,070.24

2. An 8-year bond paying 6% coupon is currently trading at $742.69 What yield is the market demanding at this price? Show equation and work.

a. 8%

b. 9%

c. 10%

d. 11%

e. 12%

3. JC Penny issued a 20-year zero-coupon bond and investors are expected to demand an 8% yield to maturity What Should be the price of the bond? Assume annual compounding. Show equation and work.

a. $311.80

b. $214.55

c. $148.64

e. $558.39

f. $463.19

4. Exxon issues a perpetual bond that promises to pay 7% interest per year. What is the price of a 1000 face value bond if the yield to maturity is 12%? Show equation and work.

a. $500.00

b. $583.33

c. $545.50

d. $600

e. $700

5. Deere Inc. issued 10-years bonds paying 6% coupons semi-annually. What should be the price of the bond if the market demands a 10% yield to maturity? Show equation and work.

a. $827.08

b. $828.81

c. $802.07

d. $803.64

f. $750.76

6. A 10-year bond paying 10% coupon semi-annually is selling for $1000. What is the yield demanded by investors? Show equation and work.

a. 12%

b. 6%

c. 11%

d. 5.50%

e. 10%

7. If the expected inflation rate is 6% and the real rate is 3%, what should be the nominal rate of a risk-free government bond? Show equation and work.

a. 8.12%

b. 9.18%

c. 9.14%

d. 10.21%

e. 8.07%

Reference no: EM132074092

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