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CHAPTER 7 Interest Rates and Bond Valuation II. CONCEPTS BOND FEATURES d 36. A bond with a 7 percent coupon that pays interest semi-annually and is priced at par will have a market price of _____ and interest payments in the amount of _____ each. a. $1,007; $70 b. $1,070; $35 c. $1,070; $70 d. $1,000; $35 e. $1,000; $70 BOND PRICES AND YIELDS e 37. All else constant, a bond will sell at _____ when the yield to maturity is _____ the coupon rate. a. a premium; higher than b. a premium; equal to c. at par; higher than d. at par; less than e. a discount; higher than BOND PRICES AND YIELDS d 38. All else constant, a coupon bond that is selling at a premium, must have: a. a coupon rate that is equal to the yield to maturity. b. a market price that is less than par value. c. semi-annual interest payments. d. a yield to maturity that is less than the coupon rate. e. a coupon rate that is less than the yield to maturity. BOND PRICES c 39. The market price of a bond is equal to the present value of the: a. face value minus the present value of the annuity payments. b. annuity payments plus the future value of the face amount. c. face value plus the present value of the annuity payments. d. face value plus the future value of the annuity payments. e. annuity payments minus the face value of the bond. BOND PRICES a 40. As the yield to maturity increases, the: a. amount the investor is willing to pay to buy a bond decreases. b. longer the time to maturity. c. lower the coupon rate desired by that investor. d. higher the price the investor offers to buy a bond. e. lower the rate of return desired by the investor. SEMIANNNUAL BONDS e 41. American Fortunes is preparing a bond offering with an 8 percent coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this, which of the following statements are correct? I. The initial selling price of each bond will be $1,000. II. Af