Question

37. Consider a five-year bond with a 10% coupon that has a present yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be: a) Par b) Higher c) Lower d) The same e) None of the above

38. ABC issued in 2018 a fifteen-year bond with coupon interest rate 4% and €1,000 face value. Today this bond is sold at €900. Which is the bond’s current yield? a) 0.062 b) 0.044 c) 0.025 d) 0.033 e) 0.020

39. While bond prices fluctuate, a) yields are constant b) short-term bond prices fluctuate even more c) coupons are constant d) the spread between yields is constant e) none of the above

40. Which of the following bond has the longest duration? a) 20-year maturity and a 12% coupon b) 20-year maturity and an 8% coupon c) 20-year maturity and a 10% coupon d) 15-year maturity and a 12% coupon e) 10-year maturity and a 15% coupo

Answer 1

1.
Lower

2.
=4%*1000/900
=0.0444

3.
coupons are constant

4.
20-year maturity and an 8% coupon