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

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?
D) $1,091.
A) $964.
B) $1,000.
C) $1,122.

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
9 months ago
Isn't it risky to assume yields will stay at 9% in 5 years?
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Ilona
9 months ago
Totally agree, $1,091 makes sense with those yields.
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Linn
9 months ago
Wait, how can it be $1,122? That seems too high.
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Merissa
10 months ago
I think the future price will be around $1,091.
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Ling
10 months ago
The bond pays 10% annually, so that's $90 a year.
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Kristeen
10 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
10 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
10 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
11 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
11 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
11 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
11 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
11 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
2 years 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
2 years ago
I'm not so sure, I would go with D) $1,091 instead.
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Cecilia
2 years ago
I think you're right, C) $1,122 sounds about right.
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Felix
2 years 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
2 years ago
I'm going with C) $1,122, aiming for the big bucks.
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Deeanna
2 years ago
I think it's A) $964, it's a discount bond.
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Lavera
2 years 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
2 years ago
I agree with Zona, the future price should be $1,000 based on the decrease in yield.
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Cyril
2 years 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
2 years ago
C) $1,122.
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Troy
2 years ago
B) $1,000.
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Bernadine
2 years ago
A) $964.
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Zona
2 years ago
I disagree, I believe the future price will be $1,000 because the yield is decreasing.
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Carmen
2 years 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
2 years ago
Yes, it's all about those calculations. $1,122 sounds like the right estimate.
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Quentin
2 years ago
I agree, compound interest can really boost the future price of a bond.
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Latrice
2 years ago
I think the answer is C) $1,122. The bond price will increase with lower yields.
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Glendora
2 years ago
I think the future price of the bond will be $964.
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