Chapter 1. Chapter 11b (22b)

Step 1

Solved Problems
true
true
You must read each slide, and complete any questions on the slide, in sequence.

Question

SVt4f/83vHy5E6o6xI+BgWrHyBT3e0nc4iOJQDTpTg4cD36OYdjGqu86u76vlH+VuCF3VJco8WnRWbTiP4tcuqJR+nztTaFYPyamaqc1ue5OQnOr3DKh6QXwcMbOxaFaw7LrGZY1QUxSVKl2st15RfRCKcdqSKXYHAeWTVgS696GRnYiczYJ6oIlicQcEBqn5HMu77Dl/ftUoR+xY6BDASz8lKhVeFXgwx8TjSi2Kqby9rZHuu8TpPjqWirApnZHD08N5CYPF+IPn1/HP8HBwWeFn2UEb0szTc1uIpxj+KO+YBuY
The yield of a bond times its price equals the total interest rate on this bond. Alternatively, this makes the yield equal to the interest rate divided by the price of bond.
3

Step 2

Question

Suppose that a bond’s yield is 2% and the price is $1,000. How much are the total interest payments on this bond, if Yield = Interest rate / Price of bond? $JZFyBOKi9y2hvr7X

If Yield = Interest rate / Price of bond, then Interest rate = Price of bond × Yield. In this case, total interest payments = $1,000 × 2% = $20.
3

Step 3

Question

Suppose that a bond’s total interest payments are $400 and its yield is 5%. How much is this bond’s price? $PHbnbUCCgLO4sk2ZTf41+w==

If Yield = Interest rate / Price of bond, then Price of bond = Interest rate / Yield. In this case, the bond’s price = $400 / 0.05 = $8,000.
3

Step 4

Question

Suppose that a bond’s total interest payments are valued at $12,000 and its price is $1,000,000. How much is its yield? Enter the answer as a percentage, rounded to two decimal places. ICUKsW0cLp5d3Q78%

If Yield = Interest rate / Price of bond, then in this case, yield = $12,000,000 / $1,000,000 = 0.012 or 1.20%.
3