Q18. Assume a city issues a $5 million bond to build a new arena. The bond pays 8 percent semiannual interest and will mature in 10 years. Current interest rates are 9%. Interest expense in the second semiannual period is closest to: A) $106,550. B) $210,830. C) $80,000.
Q19. A bond is issued with the following data: - $10 million face value.
- 9% coupon rate.
- 8% market rate.
- 3-year bond with semiannual payments.
Assuming market rates do not change, what will the bond's market value be one year from now and what is the total interest expense over the life of the bond? Value in 1-Year Total Interest Expense
A) 10,181,495 2,962,107 B) 10,181,495 2,437,893 C) 11,099,495 2,437,893
Q20. A bond is issued with an 8 percent semiannual coupon rate, 5 years to maturity, and a par value of $1000. What is the liability at the beginning of the third period if market interest rates are 10%? A) 929. B) 935. C) 923.
Q21. When the market rate is greater than the coupon rate, the bond is called a: A) discount bond. B) par bond. C) premium bond.
Q22. The real estate group of a manufacturing company needs to finance a large construction project. The CEO wants to use zero coupon bonds, because “they are easy to understand.” The Executive Vice President (EVP) recommends a bond issued with a coupon rate greater than the current market rate of interest. A consultant recommends a bond issued at par. Regarding the financial and cash flow impact, which of the following statements is least accurate? All else equal, if the company follows the: A) CEO's recommendation, there will be no impact on cash flow from operations. B) EVP's suggestion, both the cash flow from financing and cash flow from operations will be understated compared to that of the par value bond recommended by the consultant. C) EVP's suggestion, interest expense will decrease over time.
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发表于 2009-1-19 11:22
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