What rate of return would you have earned on your investment

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Reference no: EM131880111

1. Six years ago you bought a bond for $1,036. The bond has a coupon rate of 7% with semiannual payments and a face value of $1000. Today the bond is worth $976. If you sold the bond today, what rate of return would you have earned on your investment?

a) 5% b) 6% c) 7% d) 8%

2. What is the geometric average return on a stock if its returns over the past five years have been -23%, 8%, 42%, 16%, and 15%?

a) 8.3% b) 9.5% c) 10.9% d) 11.6%

3. Which of the following statements is correct?

"Everything else held constant, the market price of a discount bond will increase and approach the bond's par value as the maturity date approaches. "

"Bond prices and interest rates move in the same direction, i.e., if interest rates rise, so will bond prices"

"Everything else equal, a convertible bond should have a lower price than a non-convertible bond."

"Everything else equal, a callable bond should have a higher price than a noncallable bond."

Reference no: EM131880111

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