A bond has a par value of $1,000, a current yield of 7.13 percent, and semiannua

ID: 2657596 • Letter: A

Question

A bond has a par value of $1,000, a current yield of 7.13 percent, and semiannual coupon payments. The bond is quoted at 96.88. What is the coupon rate of the bond?

13.82%

7.13%

6.91%

14.26%

7.77%

Whipple Corp. just issued 335,000 bonds with a coupon rate of 6.35 percent paid semiannually that mature in 20 years. The bonds have a YTM of 6.79 percent and have a par value of $2,000. How much money was raised from the sale of the bonds? (Round your intermediate calculations to two decimal places and final answer to the nearest whole dollar amount.)

$1,224.97 million

$595.47 million

$638.00 million

$670.00 million

$612.48 million

There is a bond that has a quoted price of 95.859 and a par value of $2,000. The coupon rate is 6.57 percent and the bond matures in 15 years. If the bond makes semiannual coupon payments, what is the effective annual interest rate?

3.65%

7.14%

6.43%

3.51%

7.02%

Explanation / Answer

Correct option is > 6.91%

Coupon rate = Current yield x (Quoted price in/100)

Coupon rate = 7.13% x 96.88/ 100

Coupon rate = 6.91%

Correct option is > $670.00 million

Money raised from bond = Quantity of bond x Par Value

Money raised from bond = 335000 x $2000

= $670,000,000

= $670 million

Correct option is > 7.02%

Using financial calculator BA II Plus - Input details:

FV = Future Value / Face Value =

-$2,000.00

PV = Present Value = Face value x Quoted price% = 2000 x 95.859% =

$1,917.18

N = Number of years remaining x frequency =

PMT = Payment = Coupon / frequency =

-$65.70

CPT > I/Y = Rate per period or YTM per period =

3.5104

Convert Yield in annual and percentage form = Yield*frequency / 100 =

7.02%

Yield and Effective annual yield are one and the same thing.