Multiple choice

1.  A government bond issued in Germany has a coupon rate of 5%, face value of euros 100 and maturing in five years. The interest payments are made annually. Calculate the price of the bond (in euros) if the yield to maturity is 3.5%.  

a. 100 

b. 106.77 

c. 106.33 

d. None of the above 

2.  Generally, a bond can be valued as a package of: I) annuity, II) Perpetuity, III) single payment  

a. I and II only 

b. II and III only 

c. I and III only 

d. None of the above 

3.  A government bond issued in Germany has a coupon rate of 5%, face value of euros 100 and maturing in five years. The interest payments are made annually. Calculate the yield to maturity of the bond (in euros) if the price of the bond is 106 euros.  

a. 5.00% 

b. 3.80% 

c. 3.66% 

d. None of the above 

4. The present value of a $100 per year perpetuity at 10% per year interest rate is $1000. What would be the present value if the payments were compounded continuously?  

a. $1000.00 

b. $1049.21 

c. $1024.40 

d. None of the above