Chapter 6 easy review questions Flashcards
1
Q
How do you calculate the price of a bond
A
- is the FV
- shown as a negative in the calculation?
2
Q
What is interest
A
it is the coupon rate
3
Q
what is interest used for
A
to calculate the payment
4
Q
ex. 1000 par value bond based on a 6% coupon rate, paid annually
if it was paid semi-annually
A
1,000 x 6% = -60 PMT
.03 / 2 = 0.015 x 1000 = -15 PMT
5
Q
what is interest market rate
A
used to calculate I/y
annually 3% = 3 I/y
semi-annually = .03 / 2 = 0.015 I/y
