choose the right answer 10- Suppose that you read in The Wall Street Journal tha

Question

choose the right answer

10- Suppose that you read in The Wall Street Journal that a bond has a coupon rate of 9 percent, a price of 71.375% (of face value) , and pays interest annually. Rounded to the nearest whole percent, what would be the bond’s “current” yield?

a. 11%

b. 13%

c. 15%

d. 17%

e. 20%

11- A 12-year bond has a 9 percent annual coupon, a yield to maturity of 8 percent, and a face value of $1,000. What is the price of the bond?

a. $1,469

b. $1,000

c. $   928

d. $1,075

e. $1,957

12. Tuttle Enterprises is considering a project that has the following cash flow and WACC data. What is the project's NPV? Note that if a project's projected NPV is negative, it should be rejected.

WACC: 12.00%

Year                          0               1               2               3               4    

Cash flows       -$1,000     $350        $350        $350        $350

a. $77.49

b. $81.56

c. $63.05

d. $90.15

e. $94.66

Explanation / Answer

10)

Current yield:

= Annual coupon payment÷Bond price

= $90÷$713.75

= 13%

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