Fixed Income - Valuation

An investor who owns a bond with a 9% coupon rate that pays interest semiannually and matures in three years is considering its sale. If the required rate of return on the bond is 11%, the price of the bond per 100 of par value is closest to:

• 95.00.

• 95.11.

• 105.15.

A portfolio manager is considering the purchase of a bond with a 5.5% coupon

rate that pays interest annually and matures in three years. If the required rate

of return on the bond is 5%, the price of the bond per 100 of par value is closest

to:

• 98.65.

• 101.36.

• 106.43.

Which bond will most likely experience the smallest percent change in price if the market discount rates for all three bonds increase by 100 bps?

• Bond A

• Bond B

• Bond C

All three bonds are currently trading at par value.

Relative to Bond C, for a 200 bp decrease in the required rate of return, Bond B will most likely exhibit a(n):

• equal percentage price change.

• greater percentage price change.

• smaller percentage price change.

A three- year bond offers a 10% coupon rate with interest paid annually.

Assuming the following sequence of spot rates, the price of the bond is closest to:

• 96.98.

• 101.46.

• 102.95.

Bond dealers most often quote the:

• flat price.

• full price.

• full price plus accrued interest.

Bond G, described in the exhibit below, is sold for settlement on 16 June 2020.

The full price that Bond G settles at on 16 June 2020 is closest to:

• 102.36.

• 103.10.

• 103.65.

Matrix pricing allows investors to estimate market discount rates and prices for

bonds:

• with different coupon rates.

• that are not actively traded.

• with different credit quality.

A five- year, 5% semiannual coupon payment corporate bond is priced at

104.967 per 100 of par value. The bond’s yield- to- maturity, quoted on a semiannual bond basis, is 3.897%. An analyst has been asked to convert to a monthly periodicity. Under this conversion, the yield- to- maturity is closest to:

• 3.87%.

• 4.95%.

• 7.67%.

A bond with five years remaining until maturity is currently trading for 101 per 100 of par value. The bond offers a 6% coupon rate with interest paid semiannually. The bond is first callable in three years and is callable after that date on coupon dates according to the following schedule.

The bond’s yield- to- worst is closest to:

• 2.88%.

• 5.77%.

• 6.25%.