ASC553

1. An n-year $1000 par value bond matures at par and has a coupon rate of 12% convertible semiannually. It is bought at a yield rate of 10% convertible semiannually. If the term of the bond is doubled, the price will increase by $50. Find the price of the n-year bond.

• A. 1291

• B. 1100

• C. 945

• D. 1200

2. You are given:

(i) A 10-year 8% semiannual coupon bond is purchased at a discount of X.

(ii) A 10-year 9% semiannual coupon bond is purchased at a premium of Y.

(iii) A 10-year 10% semiannual coupon bond is purchased at a premium of 2X.

(iv) All bonds were purchased at the same yield rate and have par values of 1000.

Calculate Y.

• A. 2/X

• B. X^2/2

• C. X/2

• D. 2X

3. A $10,000 serial bond is to be redeemed in $1,000 installments of principal per halfyear over the next five years. Interest at the annual rate of 8% is paid semiannually on the balance outstanding. How much should an investor pay for this bond in order to produce a yield rate of 6.5% semiannually? Answer to the nearest dollar.

• A. $10,945

• B. $7,057

• C. $10,364

• D. $7,085

4. Tables above give information about the activity in two different investment accounts. The dollar weighted rate of interest is 8% in year 2014, while time weighted rate of interest (account for 2015) is 10% in year 2015. Calculate X and Y.

• A. X = 170.78, Y = 225.73

• B. X = 198.78, Y = 228.73

• C. X = 198.67, Y = 228.60

• D. X = 198.54, Y = 228.85

5. A $1000 par value 12-year bond with 10% semiannual coupons is selling for $1100.If the coupons can only be reinvested at 8% convertible semiannually, compute the overall yield rate achieved by the bond purchaser over the 12-year period.

• A. 16.8%

• B. 8.2%

• C. 16.4%

• D. 8.4%

6. You invest $1000 at time t=0 and an additional $2000 at time t=1/2. At time t=1/2 you have $1300 in your account and at time t=1 you have $3200 in your account. Find the dollar-weighted rate of return and the time-weighted rate of return on this investment.

• A. DW = 5%, TW = 5.42%

• B. DW = 0.5, TW = 0.542

• C. DW = 50%, TW = 54.5%

• D. DW = 0.05, TW = 0.0545