Finc 301 Chapter 8 Study Guide Rated A+

The discount rate that makes the present value of a bond's coupons and principal payment equal to its price is the: a. holding period yield b. effective annual yield c. realized yield d. yield to maturity {Ans: d. yield to maturity}If the yield curve has a positive slope: a. interest rates are expected to be lower in the future b. interest rates are expected to be higher in the future c. interest rates are expected to be unchanged in the future d. interest rates are expected to be more volatile in the future {Ans: b. interest rates are expected to be higher in the future}Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond? (Do not round intermediate computations. Round your final answer to the nearest dollar.) a. $1,066 b. $872 c. $945 d. $990 {Ans: b. $872}If a bond's coupon rate is equal to the market rate of interest, then the bond will sell: a. at a price equal to its face value b. at a price greater than its face