单选题

The investor would prefer the municipal bond because the taxable-equivalent yield is greater than the yield on the corporate bond: 6.4%＞6.375%.

单选题 Assume a city issues a $ 5 million bond to build a new arena. The bond pays 8 percent semiannual interest and will mature in 10 years. Current interest rates are 9 percent. What is the pres ent value of this bond and what will the bond's value be in seven years from today? Present Value Value in 7 Years from Today ①A. 4674802 4931276 ②B. 5339758 4871053 ③C. 4674802 4871053

A、

A. ①
B、

B. ②
C、

C. ③

【正确答案】 C

【答案解析】Since the current interest rate is above the coupon rate the bond will be issued at a discount. FV=$5000000, N=20, PMT=0.04×5 million = $200000, I/Y=4.5, CPT PV=$-4674802. Since the current interest rate is above the coupon rate the bond will be issued at a discount. FV=$5000000, N=6, PMT=0.04×5 million=$200000, I/Y=4.5, CPT PV=$-4871053.

单选题 An investor has the following options available to them: They can buy a 10% semi annual coupon, 10 - year bond for $1000. The coupons can be reinvested at 12%. They estimate the bond will be sold in 3 years $1050. Based on this information, what would be the average annual rate of return over the 3 years?

A、

A. 11.5%.
B、

B. 13.5%.
C、

C. 10.0%.

【正确答案】 A

【答案解析】The FV of the coupons and interest on interest: N=3×2=6; I=12/2=6; PMT=50; FV=348.77. The value of the bond at the end of 3 years is given, 1050.00. FV=1398.77(348.77+1050.00), PV=1000, N=6; I=5.75×2=11.5%.