CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Consider a 7%-coupon bond that pays semi-annually, has eight years to maturity and a face value of $100. The market requires an interest rate of 8% on bonds of this risk level. What is this bond's price?

A. $91.15
B. $94.17
C. $106.05
Correct Answer: B

N=16, I/Y=4, PMT=3.5, FV=100, PV=?=94.17

User Contributed Comments 16

User Comment
synner where did they get FV=100?
Done maturity
smillis The question doesn't state FV of $100, you have to deduce it given the magnitude of the answers...
Vadik I/Y should be 8% in case of semi-annual payments, i mean if p/y set as 2.
Yurik74 Usually annual interet rate is quoted unless indicated otherwise
mattg The convention in bond markets is to quote annual interest rates that are double semi-annual rates".
The question is saying the bond pays a TOTAL of 7% out each year: 3.5% every six months
DonAnd question did say 'face value of $100'
hit81 face value=par value = 100
moneyguy I was having problems with the BAii giving wrong TVM answers. What I had to do was 2nd, I/Y and change from 12 to 1 for these bond problems. I/Y was set to 12 for monthly compounding. I hope this helps others as I was very confused. Happy calculating everyone!
ascruggs92 Future value = Face Value = Par Value = 100.
Inaganti6 hahaha the question DID state the FV.
abs013 Do we just ignore the 7%?
abs013 Ignore my last comment
khalifa92 LOOL people really didn't see the hidden 100, dunno what ull do when doin the exam nervously.
khalifa92 if the question doesn't state the FV then we use 1000 because it's mostly used in the states.
ZainabA Can someone please write the formula with the solution? i'm a little bit confused
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