Question

You own a 10-year bond and a 20-year bond, both of which are non-callable bond and pay a coupon of 7%. What is

true about the change in value of your bonds if interest rate fall from 10% to 8%?

A) The value of the 20-yr bond will increase by $31 more than the 10-yr bond

B) The value of the 20-yr bond will increase by $40 more than the 10-yr bond

C) The value of the 20-yr bond will decrease by $31 more than the 10-yr bond

D) The value of the 20-yr bond will decrease by $40 more than the 10-yr bond

E) The value of the 20-yr bond will increase by $71 more than the 10-yr bond

If you bought a stock for $85 and sold it for $72 after a year, you also received a dividend of $15 in that year. What was the RETURN you received over the year?

A) 2.4%
B) 20.8%
C) 2.8%
D) -15.3%
E) 8.1%

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