Question 11 of 71 What is the bond equivalent yield of a 10-year, 6% semi-annual

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Question 11 of 71 What is the bond equivalent yield of a 10-year, 6% semi-annual coupon bond priced at 104? • 5.550% • 5.475% • 5.769% • 5.470% • 6.530%

Question 12 of 71 What is the effective annual yield of a 10-year, 6% quarterly coupon bond priced at 95? • 5.425% • 6.690% • 6.859% • 5.318% • 6.000%

Question 13 of 71 What is the EAY of a semi-annual coupon bond with a BEY of 5.000%? • 2.500% • 4.939% • 5.000% • 5.063% • 5.245% Question 14 of 71 What is the effective annual yield (EAY) of the bond below? Please use the following Apple bond quote on Bloomberg as a reference: • 3.850% • 4.494% • 4.545% • 4.597% • 4.655%

Question 15 of 71 What is the quoted yield on a 2-year, 0-coupon US corporate bond priced at 90? (This bond uses the semi-annual compounding convention.) • 10.819% • 5.409% • 5.338% • 2.669% • 2.205%

Question 16 of 71 Which of the following instruments are issued at discount and pay par at maturity: • 1-month T-bill • 2-year T-note • 6-month certificate of deposit (CD) • Overnight repurchase agreement

Question 17 of 71 You purchase a 365-day, $1m CD with a money market yield (MMY) of 6%. At maturity, you receive: • $1.030m • $1.059m • $1.060m • $1.061m • $1.062m

Question 18 of 71 Which of the following bonds offers the highest yield to maturity? (Assume all 3 bonds have a 365-day term.) • A 0-coupon bond, quoted at 6.00% using a bond equivalent yield and semi-annual compounding convention • A 0-coupon bond, quoted at 6.00% using a bond equivalent yield and annual compounding convention • A 0-coupon bond, quoted at 6.00% MMY • All offer an identical YTM

Question 19 of 71 You purchase a 60-day $500m CD with a quoted rate of 6% (rates quoted using MMY). What do you get at maturity? • $504.9m • $505.0m • $505.1m • $530.0m • $530.4m

Question 20 of 71 How much do you need to invest in order to receive $1,000 182 days from now given a 4% MMY? • 961.54 • 980.07 • 980.18 • 980.44 • None of the above

Explanation / Answer

Answering the first question as per Chegg policy

Question 11 of 71

What is the bond equivalent yield of a 10-year, 6% semi-annual coupon bond priced at 104?

• 5.550%

• 5.475%

• 5.769%

• 5.470%

• 6.530%

Answer: The bond market price has the formula

MP = C x {1 - [1/(1+R)T) ] / R} + [FV / (1+R)T]

where, C = Coupon =

R = Bond yield

T = No of years

Let Par value = $100

Annual Interest = (6% of $100) = $6

Semi-annual coupon = 6/2 = $3

MP = C x {1 - [1/(1+R)T) ] / R} + [FV / (1+R)T]

104 = 3 x {1 - [1/(1+R)20) ] / R} + [100 / (1+R)20]

By solving through Trial and error

R = 0.0274 = 2.74%

YTM = 2R = 2 x 2.74 = 5.48%

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