Reading 67: Introduction to the Valuation of Fixed Income black, class

cfaedu

26．Assuming the risk-free rate is 5 percent and the appropriate risk premium for an A-rated issuer is 4 percent, the appropriate discount rate for an A-rated corporate bond is:

A)   9%.

B)   5%.

C)   4%.

D)   1%.

27．Given a required yield to maturity of 6 percent, what is the intrinsic value of a semi-annual pay coupon bond with an 8 percent coupon and 15 years remaining until maturity?

A)   $1,196.

B)   $1,202.

C)   $1,095.

D)   $987.

28．What is the present value of a 7% semiannual-pay bond with a $1,000 face value and 20 years to maturity if similar bonds are now yielding 8.25%?

A)   $1,000.00.

B)   $879.52.

C)   $878.56.

D)   $912.34.

29．An investor gathered the following information on two zero-coupon bonds:

1-year, $800 par, zero-coupon bond valued at $762
2-year, $10,800 par, zero-coupon bond valued at $9,796

Given the above information, how much should an investor pay for a $10,000 par, 2-year, 8 percent, annual-pay coupon bond?

A)   $10,000.

B)   $10,558.

C)   $9,796.

D)   $11,600.

30．An investor gathered the following information on three zero-coupon bonds:

1-year, $600 par, zero-coupon bond valued at $571
2-year, $600 par, zero-coupon bond valued at $544
3-year, $10,600 par, zero-coupon bond valued at $8,901

Given the above information, how much should an investor pay for a $10,000 par, 3-year, 6 percent, annual-pay coupon bond?

A)   $10,000.

B)   $10,600.

C)   $10,016.

D)   Cannot be determined by the information provided.

cfaedu

答案和详解如下：

26．Assuming the risk-free rate is 5 percent and the appropriate risk premium for an A-rated issuer is 4 percent, the appropriate discount rate for an A-rated corporate bond is:

A)   9%.

B)   5%.

C)   4%.

D)   1%.

The correct answer was A)

The yield on a risky bond = appropriate risk-free rate + appropriate risk premium.

27．Given a required yield to maturity of 6 percent, what is the intrinsic value of a semi-annual pay coupon bond with an 8 percent coupon and 15 years remaining until maturity?

A)   $1,196.

B)   $1,202.

C)   $1,095.

D)   $987.

The correct answer was A)

This problem can be solved most easily using your financial calculator. Using semiannual payments, I = 6/2 = 3%, PMT = 80/2 = $40, N = 15x2 = 30; FV = $1,000. Solve for PV = $1,196.

28．What is the present value of a 7% semiannual-pay bond with a $1,000 face value and 20 years to maturity if similar bonds are now yielding 8.25%?

A)   $1,000.00.

B)   $879.52.

C)   $878.56.

D)   $912.34.

The correct answer was C)

N = 20 * 2 = 40; I/Y = 8.25/2 = 4.125; PMT = 70/2 = 35; and FV = 1,000.

Compute PV = 878.56.

29．An investor gathered the following information on two zero-coupon bonds:

1-year, $800 par, zero-coupon bond valued at $762
2-year, $10,800 par, zero-coupon bond valued at $9,796

Given the above information, how much should an investor pay for a $10,000 par, 2-year, 8 percent, annual-pay coupon bond?

A)   $10,000.

B)   $10,558.

C)   $9,796.

D)   $11,600.

The correct answer was B)

A coupon bond can be viewed simply as a portfolio of zero-coupon bonds. The value of the coupon bond should simply be the summation of the present values of the two zero-coupon bonds. Hence, the value of the 2-year annual-pay bond should be $10,558 ($762 + $9,796).

30．An investor gathered the following information on three zero-coupon bonds:

1-year, $600 par, zero-coupon bond valued at $571
2-year, $600 par, zero-coupon bond valued at $544
3-year, $10,600 par, zero-coupon bond valued at $8,901

Given the above information, how much should an investor pay for a $10,000 par, 3-year, 6 percent, annual-pay coupon bond?

A)   $10,000.

B)   $10,600.

C)   $10,016.

D)   Cannot be determined by the information provided.

The correct answer was C)

A coupon bond can be viewed simply as a portfolio of zero-coupon bonds. The value of the coupon bond should simply be the summation of the present values of the three zero-coupon bonds. Hence, the value of the 3-year annual-pay bond should be $10,016 (571 + 544 + 8,901).