Principles of Corporate Finance Exam Questions with Verified Solutions (Graded A+)
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Course
Principles of Corporate Finance
Institution
Principles Of Corporate Finance
Principles of Corporate Finance Exam Questions with Verified Solutions (Graded A+)
face value - Answers -par value or principle amount
-notational amount used to compute interest payments
-standard increments (ex $1000)
-repaid at maturity
coupon rate - Answers -set by issuer and stated ...
Principles of Corporate Finance Exam Questions with Verified Solutions (Graded A+)
face value - Answers -par value or principle amount
-notational amount used to compute interest payments
-standard increments (ex $1000)
-repaid at maturity
coupon rate - Answers -set by issuer and stated on the bond certificate
-expressed as an APR so amount is
cpn= (coupon rateXface value)/(# of cpn payments per year)
zero coupon bonds - Answers -2 cash flows
-bonds market price at time of purchase
-bonds face value at maturity
-treasury bills are zero coupon US gov bonds with maturity up to one year
-always trade at a discount
yield to maturity of a zero coupon bond - Answers -discount rate that sets the present value of the
promised bond payments equal to the current market price of the bond
1+YTMn= [face value/price]^1/n
, Why is there a negative relation between maturity and bond price? - Answers longer maturity=lower
price
shorter maturity=higher price
coupon bonds - Answers -pay FV at maturity
-make regular payemnts
-two types of US treasury coupon securities
1)notes
2)bonds
-return on coupon bonds = purchase price - principle value
-trade at either discount or premium
premium bonds - Answers greater than face value
-coupon rate >YTM
discount bonds - Answers less than the face value
coupon rate < YTM
par bonds - Answers -if a bond sells at par value, the only return investors will earn is from the coupons
that the bonds pays
-equals face value
coupon rate= YTM
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