Author Question: If the final expressions in a present value equation used to calculate the price of a bond you are ... (Read 42 times)

CQXA · **on:** Jun 29, 2018

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are 75 / (1 + .04)6 + 2,500 / (1 + .04)6, which of the following is correct?

A) The face value is 2,500, the interest rate you need is 6 percent, and the coupon will mature in 4 years.
B) The face value is 2,500, the coupon is 75, and the coupon will mature in 4 years.
C) The coupon is 75, the interest rate you need is 4 percent, and the coupon will mature in 6 years.
D) The face value is 75, the interest rate you need is 1.04 percent, and the coupon will mature in 6 years.

Question 2

If the final expressions in a present value equation used to calculate the price of a bond you are considering buying are 50 / (1 + .08)3 + 500 / (1 + .08)3, which of the following is correct?

A) The face value is 500, the coupon is 50, and the coupon will mature in 3 years.
B) The face value is 50, the interest rate you need is 8 percent, and the coupon will mature in 3 years.
C) The coupon is 50, the interest rate you need is 1.08 percent, and the coupon will mature in 3 years.
D) The face value is 500, the interest rate you need is 3 percent, and the coupon will mature in 8 years.