1. A 6 percent, annual coupon bond is currently selling at a premium and matures in 7 years. The bond was originally issued 3 years ago at par. Which one of the following statements is accurate in respect to this bond today?
A. The face value of the bond today is greater than it was when the bond was issued.
B. The bond is worth less today than when it was issued.
C. The yield-to-maturity is less than the coupon rate.
D. The coupon rate is greater than the yield-to-maturity.
2. You are considering two loans. The terms of the two loans are equivalent with the exception of the interest rates. Loan A offers a rate of 8.10 percent compounded daily. Loan B offers a rate of 8.25 percent compounded semi-annually. Loan _____ is the better offer because______.
A. A; the effective annual rate is 8.41 percent
B. A; the annual percentage rate is 8.41 percent
C. B; the annual percentage rate is 8.32 percent
D. B; the interest is compounded less frequently
E. B; the effective annual rate is 8.42 percent