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CFA Institute CFA-Level-I Exam - Topic 1 Question 11 Discussion

Actual exam question for CFA Institute's CFA-Level-I exam
Question #: 11
Topic #: 1
[All CFA-Level-I Questions]

An investor buys a 25-year, 10 percent annual pay bond for $900 planning to sell the bond in 5 years when he estimates yields will be 9 percent. What is the estimate of the future price of this bond?

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Suggested Answer: D
by Samuel at Jan 14, 2025, 11:49 PM

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Kelvin
4 months ago
Isn't it risky to assume yields will stay at 9% in 5 years?
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Ilona
4 months ago
Totally agree, $1,091 makes sense with those yields.
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Linn
5 months ago
Wait, how can it be $1,122? That seems too high.
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Merissa
5 months ago
I think the future price will be around $1,091.
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Ling
5 months ago
The bond pays 10% annually, so that's $90 a year.
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Kristeen
5 months ago
I feel like I should be able to calculate this, but I keep second-guessing myself. I might go with option D, but I'm not entirely confident.
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Gladys
6 months ago
I think the bond's price will increase since the yield is lower than the coupon rate, but I can't recall the exact formula to use.
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Mona
6 months ago
This question feels similar to one we practiced where we had to find the price based on coupon rates and market yields. I think I might lean towards option C.
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Tiffiny
6 months ago
I remember something about calculating the future price based on yield changes, but I'm not sure how to apply it here.
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Eva
6 months ago
No problem, I've got this. I'll just plug the numbers into the bond pricing formula and solve for the future price. Should be straightforward as long as I don't mess up the calculations.
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Alaine
6 months ago
I'm a bit confused on how to approach this. Do I need to calculate the present value of the remaining coupon payments and the principal at the new yield? Or is there a shortcut formula I'm forgetting?
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Val
6 months ago
Okay, let me think this through step-by-step. The bond has a 10% coupon rate and 25-year maturity, and the investor plans to sell it in 5 years when the yield is 9%. I'll need to calculate the present value at the new 9% yield.
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Sena
6 months ago
Hmm, this looks like a bond pricing question. I'll need to remember the formula for the present value of a bond and how to adjust for changes in yield.
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Jina
1 year ago
Woohoo, time to show off my bond pricing skills! I'm guessing C) $1,122. Let's see if I'm as smart as I think I am!
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Jeanice
1 year ago
I'm not so sure, I would go with D) $1,091 instead.
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Cecilia
1 year ago
I think you're right, C) $1,122 sounds about right.
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Felix
1 year ago
A) $964? What is this, a discount bond? Nah, I'm going with the big bucks, C) $1,122.
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Yasuko
1 year ago
I'm going with C) $1,122, aiming for the big bucks.
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Deeanna
1 year ago
I think it's A) $964, it's a discount bond.
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Lavera
1 year ago
B) $1,000? Really? That's too easy. I bet the answer's gonna be something more complex, like C) $1,122.
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Cory
1 year ago
I agree with Zona, the future price should be $1,000 based on the decrease in yield.
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Cyril
1 year ago
D) $1,091 sounds about right to me. Time to break out the financial calculator and get this right!
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Selma
1 year ago
C) $1,122.
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Troy
1 year ago
B) $1,000.
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Bernadine
1 year ago
A) $964.
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Zona
1 year ago
I disagree, I believe the future price will be $1,000 because the yield is decreasing.
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Carmen
1 year ago
Hmm, let's see. I'd say the answer is C) $1,122. Gotta love those compound interest calculations!
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Tanesha
1 year ago
Yes, it's all about those calculations. $1,122 sounds like the right estimate.
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Quentin
1 year ago
I agree, compound interest can really boost the future price of a bond.
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Latrice
1 year ago
I think the answer is C) $1,122. The bond price will increase with lower yields.
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Glendora
1 year ago
I think the future price of the bond will be $964.
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