6．at is the semiannual-pay bond equivalent yield on an annual-pay bond with a yield to maturity of 12.51 percent?

A)   12.00%.

B)   11.49%.

C)   12.51%.

D)   12.14%.

7．sco Foods has a 10-year bond outstanding with an annual coupon of 6.5 percent. If the bond is currently priced at $1,089.25, which of the following is closest to the bond-equivalent yield of the bond?

A)   5.33%.

B)   5.42%.

C)   5.14%.

D)   5.26%.

8．nsider a 6-year $1,000 par bond priced at $1,011. The coupon rate is 7.5 percent paid semiannually. Six-year bonds with comparable credit quality have a yield to maturity (YTM) of 6 percent. Should an investor purchase this bond?

A)   No, the bond is overvalued by $64.

B)   Yes, the bond is undervalued by $64.

C)   Yes, the bond is undervalued by $38.

D)   No, the bond is overvalued by $38.

答案和详解如下：

6．at is the semiannual-pay bond equivalent yield on an annual-pay bond with a yield to maturity of 12.51 percent?

A)   12.00%.

B)   11.49%.

C)   12.51%.

D)   12.14%.

The correct answer was D)

The semiannual-pay bond equivalent yield of an annual-pay bond = 2 * [(1 + yield to maturity on the annual-pay bond)^0.5 – 1] = 12.14%.

7．sco Foods has a 10-year bond outstanding with an annual coupon of 6.5 percent. If the bond is currently priced at $1,089.25, which of the following is closest to the bond-equivalent yield of the bond?

A)   5.33%.

B)   5.42%.

C)   5.14%.

D)   5.26%.

The correct answer was D)

First, find the annual yield to maturity of the bond as: FV=$1,000, PMT=$65, N=10, PV= –1,089.25, and solve for I/Y = 5.33%. Then, find the BEY as: 2 × [(1 + YTM)^0.5 – 1] = 0.0526 = 5.26%.

8．nsider a 6-year $1,000 par bond priced at $1,011. The coupon rate is 7.5 percent paid semiannually. Six-year bonds with comparable credit quality have a yield to maturity (YTM) of 6 percent. Should an investor purchase this bond?

A)   No, the bond is overvalued by $64.

B)   Yes, the bond is undervalued by $64.

C)   Yes, the bond is undervalued by $38.

D)   No, the bond is overvalued by $38.

The correct answer was B)

FV = 1,000
PMT = 37.5
N = 12
I/Y = 3%
CPT PV = 1,074.66
1,074.66 – 1,011 = 64