Calculate bond selling value

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Reference no: EM1361231

46.
A firm has an issue of $1,000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for _________ today.
(a) $1,000
(b) $805.20
(c) $851.50
(d) $1,268.20

47.
Hewitt Packing Company has an issue of $1,000 par value bonds with a 14 percent annual coupon interest rate. The issue has ten years remaining to the maturity date. Bonds of similar risk are currently selling to yield a 12 percent rate of return. The current value of each Hewitt bond is _________.
(a) $791.00
(b) $1,000
(c) $1,052.24
(d) $1,113.00

57.
If expected return is less than required return on an asset, rational investors will
(a)buy the asset, which will drive the price up and cause expected return to reach the level of the required return.
(b)sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.
(c)sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.
(d)buy the asset, since price is expected to increase.

58.
If the expected return is above the required return on an asset, rational investors will
(a)buy the asset, which will drive the price up and cause expected return to reach the level of the required return.
(b)sell the asset, which will drive the price down and cause the expected return to reach the level of the required return.
(c)sell the asset, which will drive the price up and cause the expected return to reach the level of the required return.
(d)sell the asset, since price is expected to decrease.

 

Reference no: EM1361231

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