Bonds Valuation HCT

What is a bond?

• an agreement or friendship

• binding security

• something that binds, fastens, confines, or holds together

• a type of debt a company issues to investors

A bond issued by a corporation is called a ________ .

• corporate bond

• market share

• stock option

• share of stock

What is a coupon?

• something you use in a supermarket to decrease your cost

• an asset bought in the stock market

• used in the stock market to lessen the initial cost of stocks

• the interest rate on a bond at the time it is issued

The rate of interest on a bond is called the ________ .

• bond rate

• coupon rate

• discount rate

• interest rate

A bond with a face value of $1,000 and a coupon rate of 7% will pay how much annually in interest?

• A. $70

• B. $100

• C. $7

• D. $700

1.    Etisalat PLC 2030 Fibre Optic Bond has an annual coupon rate of 10% and a Par Value of $1,000 and a price of $1,400. Given this information, the bond’s current yield is __________

• 7.14%

• 8.2%

• 6.1%

• 7.9%

Answer explanation

Answer: Coupon rate = 10% and Par Value = $1,000. Bond Price = $1,400

Coupon Payment ($) = 10% x $1,000 = $100.

Current Yield = Coupon Payment / Bond Price x 100

Current Yield = $100 / $1,400 x 100

Current Yield = 7.14%

Emaar PLC 2025 Blue Cement Bond has a coupon $90 and a Par Value of $1,000 and a price of $1,400. Given this information, the bond’s current yield is ________

• 6.9%

• 7%

• 6.42%

• 5.5%

Answer explanation

Answer: Coupon rate = 10% and Par Value = $1,000. Bond Price = $1,400

Coupon Payment ($) = $90. 

Current Yield = $90 / $1,400 x 100

Current Yield = 6.42%

What is the primary difference between a stock and a bond?

• A. Stocks represent ownership, while bonds represent debt.

• B. Stocks are more volatile than bonds.

• C. Bonds always provide a fixed return, while stocks do not.

• D. Stocks are issued by governments, while bonds are issued by corporations.

Emirates Hotel PLC World Cup Bond 2027 has an annual coupon rate of 7.5%, a par value of $1,000 a bond price of $875 and a yield to maturity of 10%. Given this data, the annual coupon payment is ____________

• 100

• 75

• 87.5

• 125

Answer explanation

Answer: Coupon Payment ($) = 7.5% x $1,000 = $75.

A Treasury bond is quoted at a price of $1,011.40 with a current yield of 7.236%. What is the coupon rate?

• 7.236%

• 7.31%

• $ 72.36

• $ 73.1

Answer explanation

Answer: Current Yield = Coupon payment ($) / Bond price

7.236% = Coupon payment ($) / $1,011.40

Coupon payment = 7.236% x $1,011.40 = $73.18

Coupon rate = Coupon payment / Par Value x 100 = $73.18 / $1,000 x 100

Coupon rate = 7.31%