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Please download the following file to use on your quiz. Practice template

The coupon rate of a bond is:

Use the following information to answer the question(s) below. Consider the following four alternatives: 1. $132 to be received two years from now.2. $160 to be received five years from now.3. $200 to be received eight years from now.4. $220 to be received ten years from now. The ranking of the four alternatives from most valuable to least valuable if the interest rate is 6% per year would be:

Consider the following timeline:If the current market rate of interest is 6%, then the future value of this timeline as of year 3 is closest to:

Which of the following statements regarding growing annuities is FALSE?

Use the “Giadeo” spreadsheet to complete this problem. You observe the following information about some market securities and want to try to take advantage of any arbitrage opportunities available; assume that investments have the same risk.  Assume you cannot buy partial shares.  In order to take advantage of an arbitrage opportunity, you would: Price Year 1 Year 2 Baileys  $         1,461  $         1,680  $            –   Jack  $            635  $                –    $         840 Captain  $         4,925  $         4,200  $     1,680 Jose  $         5,200  $         3,200  $     3,200  

If the current inflation rate is 5%, then the nominal rate necessary for you to earn an 8% real interest rate on your investment is closest to:

The British government has a Consol bond outstanding that pays 100 British Pounds in interest each year forever.   Assuming that the current interest rate in Great Britain is 9% and that you will receive your first interest payment one year from now, then the value of the Consol bond is closest to:

You are looking at an account statement from your bank, Madoff Mutual.  You note that the statement has listed an nominal rate of 8.0%.  You believe inflation is going to be 5.25%.  You were planning to invest $100 in this account.  If you are correct about inflation, how much would you have in the account at the end of 1 year, and how much would it be worth in today’s dollars?

The Ford Prefect Company has bonds outstanding with a face value of $1,000 that reach maturity in 15 years.  The bond’s indenture indicates that the stated coupon rate for this bond is 12% and that the coupon payments are to be made semiannually.  Assuming the appropriate YTM on the bond is 7%, then the price that this bond trades for will be closest to: