- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 1. Bond Prices and the Time Value of Money

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**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?

B. $94.17

C. $106.05

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

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**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 |