If the required return or appropriate rate of interest on the bond is 16%, what
ID: 2651300 • Letter: I
Question
If the required return or appropriate rate of interest on the bond is 16%, what is the market value of 14. an 8% coupon bond with a maturity of 10 years and a par value of $1,000? Coupon is paid emi-annual A) $214.50 B) $392.7 C) $1000.01 D) $619.42 E) $607.27 15. What is the present value of an income stream provides $100 at the end of year 1, $200 at the end of year 2, $250 during each of years 3 to 6, when discounted at 8%? A) $775.50 B) $1,300.00 C) $421.60 D) $1,960.00 E) none of the above.Explanation / Answer
Question 14. semi annual @ 16 % Present Year Return @8% PV factor Value 1 40 0.925926 37.04 2 40 0.857339 34.29 3 40 0.793832 31.75 4 40 0.735030 29.40 5 40 0.680583 27.22 6 40 0.630170 25.21 7 40 0.583490 23.34 8 40 0.540269 21.61 9 40 0.500249 20.01 10 40 0.463193 18.53 11 40 0.428883 17.16 12 40 0.397114 15.88 13 40 0.367698 14.71 14 40 0.340461 13.62 15 40 0.315242 12.61 16 40 0.291890 11.68 17 40 0.270269 10.81 18 40 0.250249 10.01 19 40 0.231712 9.27 20 1040 0.214548 223.13 Total Return 607.27 Cash inflows are also discounted semiannually by 8% required Rate Answer: E Question 15. at 8% Year Return PV factor Value 1 100 0.92593 92.59 2 200 0.85734 171.47 3 250 0.79383 198.46 4 250 0.73503 183.76 5 250 0.68058 170.15 6 250 0.63017 157.54 Total 1300 973.96 Answer: E.