Finance Exam Review Npr Irr

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Fin 221 Fall 2006 Exam 3

Multiple Choice
Identify the choice that best completes the statement or answers the question.

1)Ken Williams Ventures' recently issued bonds that mature in 15 years. They have a par value of $1,000 and an annual coupon of 6%. If the current market interest rate is 8%, at what price should the bonds sell? |A. |$801.80 | |B. |$814.74 | |C. |$828.81 | |D. |$830.53 | |E. |$847.86 |

2)Brown Enterprises' bonds currently sell for $1,025. They have a 9-year maturity, an annual coupon of $80, and a par value of $1,000. What is their yield to maturity? |A. |6.87% | |B. |7.03% | |C. |7.21% | |D. |7.45% | |E. |7.61% |

3)Kholdy Inc's bonds currently sell for $1,275. They pay a $120 annual coupon and have a 20-year maturity, but they can be called in 5 years at $1,120. Assume that no costs other than the call premium would be incurred to call and refund the bonds, and also assume that the yield curve is horizontal, with rates expected to remain at current levels on into the future. What is the difference between the bond's YTM and its YTC? |A. |1.48% | |B. |1.54% | |C. |1.68% | |D. |1.82% | |E. |1.91% |

4)A 20-year, $1,000 par value bond has a 9% annual coupon. The bond currently sells for $925. If the yield to maturity remains at its current rate, what will the price be 5 years from now? |A. |$933.09 | |B. |$941.86 | |C. |$951.87 | |D. |$965.84 | |E. |$978.40 |

5)Which of the following statements is CORRECT?
|A. |The shorter the time to maturity, the greater the change in the value of a bond in response to a given change in | | |interest rates....
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