bond valuation

________ are examples of fixed-income securities

• Common stock and pension funds

• Mortgages and pension annuities

• Mutual funds and common stock

• Preferred stock and common stock

Consider a fixed-income security that promises to pay $150 each year for the next five years. How much is this five-year annuity worth if the appropriate discount rate is 7% per year?

• $534.74

• $615.03

• $802.50

• $867.96

The price of any existing fixed-income security ________ when market interest rates rise because investors will only be willing to ________ them if they offer a competitive yield.

• rises; buy

• rises; sell

• falls; buy

• falls; sell

A zero-coupon bond is also known as ________.

• a perpetual bond

• a pure discount bond

• a market rebate

• an infinite bond

What is the yield of a 1-year pure discount bond with a price of $850 and a face value of $1,000?

• 8.50%

• 9.09%

• 15.00%

• 17.65%

A five-year coupon bond has a coupon rate of 8%, a return rate of 9%, and a face value of $1,000. What is its current price and how does it compare to its face value?

• $961.1

• $952

• $980

• $912