Assume That a Face Value of $1,000 for Each Type

question 83

Multiple Choice

Assume that a face value of $1,000 for each type of bond. Yields are calculated to full maturity with semi-annual compounding. Yield change is the change in ask yield from the previous close.

$\begin{array}{|l|r|l|r|r|r|r|r|}\hline \text { Issuer } & \text { Coupon } & \begin{array}{l}\text { Maturity } \\\text { Date }\end{array} & \begin{array}{r}\text { Bid } \\\text { Price }\end{array} & \begin{array}{r}\text { Ask } \\\text { Price }\end{array} & \begin{array}{r}\text { Bid } \\\text { Yield }\end{array} & \begin{array}{r}\text { Ask } \\\text { Yield }\end{array} & \begin{array}{r}\text { Yield } \\\text { Change }\end{array} \\\hline \text { Pipa Co. } & 7.500 & 2012-\text { Aug-24 } & 120.92 & 121.02 & 5.41 & 5.37 & +0.011 \\\hline \text { Harolds Inc. } & 8.000 & 2025 \text {-Jan-10 } & 84.33 & 84.63 & 5.02 & 4.88 & +0.003 \\\hline \text { Willie Ltd. } & 6.250 & 2018-O c t-1 & 89.47 & 89.89 & 5.19 & 4.97 & -0.016 \\\hline \text { Kat Enterprise } & 8.250 & 2013-M a r-13 & 109.09 & 109.49 & 5.34 & 5.28 & -0.009 \\\hline\end{array}$

-What is the current yield for the Kat bond? Note: closing price here is the mid-point between final bid and ask quotation.

• A) 7.5%
• B) 6.7%
• C) 7.9%
• D) 3.8%
• E) 8.3%

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Definitions:

Social Security

A government program that provides financial assistance to people with inadequate or no income, especially the elderly, disabled, and families with children.

CPI

A metric known as the Consumer Price Index tracks the average price changes in a selected assortment of consumer items and services like medical care, transportation, and food, adjusting for their relative significance.

Price Inflation

The rate of growth in the overall price levels for goods and services, cutting down on purchasing capacity.

Real Price

The cost of a product or service once inflation has been taken into account, showing its true ability to purchase.