alleryStart learning →A 2-year bond (face 100) pays coupon 5 a year. Discount factors are 0.95 and 0.90. Fair price?
ARs 100.00
BRs 94.50
CRs 104.25
DRs 99.25
Answer & Solution
Correct answer: D. Rs 99.25
Each cash flow is multiplied by its own discount factor: 5 x 0.95 + 105 x 0.90 = 4.75 + 94.50 = Rs 99.25.
Keep practising Bond Valuation
Browse all Bond Valuation questions for CA Final, or explore more Strategicfinancialmanagement topics.
Related questions
The price-yield relation of a bond is described as what?For a discount bond, how does YTM compare with current yield?On a bond sold at a clean quote, what does the buyer pay at settlement?After a coupon is paid, how does a bond's dirty price behave?A 6% par-100 bond pays on 1 Apr and 1 Oct. On 1 Jul clean price is 98.20. Under 30/360 theHow does the term-structure approach discount a bond's cash flows?In the DDM, the dividend growth rate serves as a proxy for what?Which preferred stock carries an embedded option to swap into another security?