# FIN 370T Wk 3 – Apply: Homework

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## FIN 370T Wk 3 – Apply: Homework

A 6 percent corporate coupon bond is callable in 10 years for a call premium of one year of coupon payments. Assuming a par value of \$1,000, what is the price paid to the bondholder if the issuer calls the bond?

Multiple Choice

•      \$600
•      \$1,000
•      \$60
•      \$1,060

Regarding a bond's characteristics, which of the following is the principal loan amount that the borrower must repay?

Multiple Choice

•      Par or face value
•      Maturity date
•      Time to maturity value

A 5.5 percent corporate coupon bond is callable in four years for a call premium of one year of coupon payments. Assuming a par value of \$1,000, what is the price paid to the bondholder if the issuer calls the bond? (Assume annual interest payments.)

Multiple Choice

•      \$220
•      \$1,000
•      \$55
•      \$1,055

A 3.25 percent TIPS has an original reference CPI of 194.1. If the current CPI is 210.3, what is the current interest payment? (Assume semi-annual interest payments and a par value of \$1,000.)

Multiple Choice

•      \$31.54
•      \$16.25
•      \$15.00
•      \$17.61

To increase the liquidity for the home mortgage market, Fannie Mae and Freddie Mac purchased home mortgages from banks and other lenders. They combined the mortgages into diversified portfolios of loans and issued:

Multiple Choice

•      current yield securities.
•      trust securities.
•      Treasury Inflation Protected Securities.
•      mortgage-backed securities.

Determine the interest payment for the following three bonds: 2.5 percent coupon corporate bond (paid semi-annually), 3.15 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a \$1,000 par value.)

Multiple Choice

•      \$12.50, \$15.75, \$100, respectively
•      \$12.50, \$15.75, \$0, respectively
•      \$2.50, \$3.15, \$0, respectively
•

Which of the following is NOT a factor that determines the coupon rate of a company's bonds?

Multiple Choice

•      The term of the loan.
•      All of the options are factors that determine the coupon rate of a company's bonds.
•      The amount of uncertainty about whether the company will be able to make all the payments.
•      The level of interest rates in the overall economy at the time.

A 4.5 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of \$1,000, what is the price paid to the bondholder if the issuer calls the bond?

Multiple Choice

•      \$45
•      \$1,000
•      \$1,045
•      \$225

A 3.75 percent TIPS has an original reference CPI of 183.9. If the current CPI is 214.7, what is the current interest payment? (Assume semi-annual interest payments and a par value of \$1,000.)

Multiple Choice

•      \$37.50
•      \$21.89
•      \$43.78
•      \$18.75
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