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Basic Question 7 of 19
You have a bond with six years to maturity. The bond pays 12% coupons semi-annually, but the market demands only a 10% return. If the market rate stays constant, what is the price path for year 6, 4, 2, and 0?
B. $95.08; 96.53; 98.17; 99.06
C. $108.86; 106.46; 103.54; 100
A. $72.75; 78.66; 87.32; 100
B. $95.08; 96.53; 98.17; 99.06
C. $108.86; 106.46; 103.54; 100
User Contributed Comments 9
| User | Comment |
|---|---|
| gruszewski | No need to compute. It is the only answer with amortized premium. |
| katybo | well done! |
| Done | Common sense...12% cpn, mkt wants 10% PREMIUM Only answer is the last one. Still do the math to be familiar with the computation |
| MUTE | Do you really have the time? if you understand the concept, premium bond will be decreasing towards maturity while the value of Discounted bond will be increasing towards maturity |
| steved333 | True, it's just logic, but you need to take the time to do th math. What if you get a similar question, and there are two possibilities that put it at premium? |
| TammTamm | It is the only answer that shows this is a premium bond |
| antihead | This is training here., hence I computed it in 1 minute. In the exam, no reason to compute. |
| jonan203 | you guys, what if every answer started at a premium? at least compute the first year, i highly doubt that real exam will so obviously have only one answer that starts at a premium. |
| farhan92 | agree with antihead you'll also increase your finger speed -your ladies will appreciate this fellas |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
identify the relationships among a bond's price, coupon rate, maturity, and yield-to-maturity
CFA® 2024 Level I Curriculum, Volume 4, Module 6.