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.
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