1. Calculate the price of a 5-year $100,000 8% government bond that pays interest semi-annually, if the required market yield is 6% p.a. compounding semi-annually.
$108,530.20
$105,428.20
$98,542.90
$103,586.85
2. Which of the following statements is FALSE?
1. Prices of longer maturity bonds are more sensitive to interest rate changes.
2. Simple interest is charged on bank bills while compound interest is applied on bonds.
3. A bond with a coupon rate of 10% and yield of 12% will sell at a discount.
4. If XYZ Corp's $1,000 8% bond with 10 years to maturity is selling at $960, the yield is less than 8%.