CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

You have a bond with six years to maturity. The bond pays 12% coupons semi-annually, but the market demands only a 10% return. If the market rate stays constant, what is the price path for year 6, 4, 2, and 0?

A. $72.75; 78.66; 87.32; 100
B. $95.08; 96.53; 98.17; 99.06
C. $108.86; 106.46; 103.54; 100
Correct Answer: C

N=12, I/Y=5, PMT=6, FV=100; PV=?=108.86; N=8, PV=106.46; N=4, PV= 103.54; N=0, PV =100

User Contributed Comments 9

User Comment
gruszewski No need to compute. It is the only answer with amortized premium.
katybo well done!
Done Common sense...12% cpn, mkt wants 10% PREMIUM
Only answer is the last one. Still do the math to be familiar with the computation
MUTE Do you really have the time? if you understand the concept, premium bond will be decreasing towards maturity while the value of Discounted bond will be increasing towards maturity
steved333 True, it's just logic, but you need to take the time to do th math. What if you get a similar question, and there are two possibilities that put it at premium?
TammTamm It is the only answer that shows this is a premium bond
antihead This is training here., hence I computed it in 1 minute. In the exam, no reason to compute.
jonan203 you guys, what if every answer started at a premium? at least compute the first year, i highly doubt that real exam will so obviously have only one answer that starts at a premium.
farhan92 agree with antihead you'll also increase your finger speed -your ladies will appreciate this fellas
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