Question 1
The present value of a bond can be computed by discounting the ________ to be received from the bond.
◦ capital gains
◦ required rate of return
◦ tax benefits
◦ future cash flows (coupon and principal payments)
Question 2
The secondary market price of a bond is based on
◦ the bond's coupon payments.
◦ the number of years the bond has until maturity.
◦ the market interest rate required for bonds of a similar risk and term.
◦ All of these are factors in determining the bond's market price.