Question 1

A 7.5% coupon bond with an ask price of $100.00 pays interest every 182 days.If the bond paid interest 62 days ago, the invoice price of the bond would be

Accepted Answer

A) $1,011.67. 
B) $1,012.35. 
C) $1,012.77. 
D) $1,011.98. 
A) $1,011.67. 
B) $1,012.35. 
C) $1,012.77. 
D) $1,011.98.

Question 2

An 8% coupon U.S.Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15.The accrued interest on the $100,000 face value of this note is

Accepted Answer

A) $491.80. 
B) $800.00. 
C) $983.61. 
D) $1,661.20. 
A) $491.80. 
B) $800.00. 
C) $983.61. 
D) $1,661.20.

Question 3

A coupon bond that pays interest annually has a par value of $1,000, matures in five years, and has a yield to maturity of 10%.The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

Accepted Answer

A) $712.99 
B) $620.92 
C) $1,123.01 
D) $886.28 
A) $712.99 
B) $620.92 
C) $1,123.01 
D) $886.28

Question 4

A 9% coupon bond with an ask price of 100:00 pays interest every 182 days.If the bond paid interest 112 days ago, the invoice price of the bond would be

Accepted Answer

A) $1,027.69. 
B) $1,027.35. 
C) $1,026.77. 
D) $1,027.98. 
A) $1,027.69. 
B) $1,027.35. 
C) $1,026.77. 
D) $1,027.98.

Question 5

A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%, the invoice price of the bond will be

Accepted Answer

A) $1,087.50. 
B) $1,110.10. 
C) $1,150.00. 
D) $1,160.25. 
A) $1,087.50. 
B) $1,110.10. 
C) $1,150.00. 
D) $1,160.25.

Question 6

If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago, the accrued interest would be

Accepted Answer

A) $27.69. 
B) $27.35. 
C) $26.77. 
D) $27.98. 
A) $27.69. 
B) $27.35. 
C) $26.77. 
D) $27.98.

Question 7

A credit default swap is

Accepted Answer

A) a fancy term for a low-risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) an insurance policy on the default risk of federal government and corporate bonds and loans. 
A) a fancy term for a low-risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) an insurance policy on the default risk of federal government and corporate bonds and loans.

Question 8

Three years ago, you purchased a bond for $974.69.The bond had three years to maturity, a coupon rate of 8%, paid annually, and a face value of $1,000.Each year, you reinvested all coupon interest at the prevailing reinvestment rate shown in the table below.Today is the bond's maturity date.What is your realized compound yield on the bond?

Accepted Answer

A) 6.43% 
B) 7.96% 
C) 8.23% 
D) 8.97% 
A) 6.43% 
B) 7.96% 
C) 8.23% 
D) 8.97%

Question 9

If a 6% coupon bond is trading for $950.00, it has a current yield of

Accepted Answer

A) 6.5%. 
B) 6.3%. 
C) 6.1%. 
D) 6.0%. 
A) 6.5%. 
B) 6.3%. 
C) 6.1%. 
D) 6.0%.

Question 10

A convertible bond has a par value of $1,000 and a current market price of $850.The current price of the issuing firm's stock is $29, and the conversion ratio is 30 shares.The bond's market conversion value is

Accepted Answer

A) $729. 
B) $810. 
C) $870. 
D) $1,000. 
A) $729. 
B) $810. 
C) $870. 
D) $1,000.

Question 11

One year ago, you purchased a newly-issued TIPS bond that has a 4% coupon rate, five years to maturity, and a par value of $1,000.The average inflation rate over the year was 3.6%.What is the amount of the coupon payment you will receive, and what is the current face value of the bond?

Accepted Answer

A) $40.00, $1,000 
B) $41.44, $1,036 
C) $40.00, $1,036 
D) $36.00, $1,040 
A) $40.00, $1,000 
B) $41.44, $1,036 
C) $40.00, $1,036 
D) $36.00, $1,040

Question 12

The bond indenture includes

Accepted Answer

A) the coupon rate of the bond. 
B) the par value of the bond. 
C) the maturity date of the bond. 
D) All of the options are correct. 
A) the coupon rate of the bond. 
B) the par value of the bond. 
C) the maturity date of the bond. 
D) All of the options are correct.

Question 13

A 7% coupon bond with an ask price of $100.00 pays interest every 182 days.If the bond paid interest 32 days ago, the invoice price of the bond would be

Accepted Answer

A) $1,005.67. 
B) $1,007.35. 
C) $1,006.35. 
D) $1,006.15. 
A) $1,005.67. 
B) $1,007.35. 
C) $1,006.35. 
D) $1,006.15.

Question 14

Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%.If interest rates remain constant, one year from now, the price of this bond will be

Accepted Answer

A) higher. 
B) lower. 
C) the same. 
D) $1,000. 
A) higher. 
B) lower. 
C) the same. 
D) $1,000.

Question 15

Ceteris paribus, the price and yield on a bond are

Accepted Answer

A) positively related. 
B) negatively related. 
C) sometimes positively and sometimes negatively related. 
D) not related. 
A) positively related. 
B) negatively related. 
C) sometimes positively and sometimes negatively related. 
D) not related.

Question 16

When a bond indenture includes a sinking fund provision,

Accepted Answer

A) firms must establish a cash fund for future bond redemption. 
B) bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed. 
C) bondholders may lose because their bonds can be repurchased by the corporation at below-market prices. 
D) firms must establish a cash fund for future bond redemption, and bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed. 
A) firms must establish a cash fund for future bond redemption. 
B) bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed. 
C) bondholders may lose because their bonds can be repurchased by the corporation at below-market prices. 
D) firms must establish a cash fund for future bond redemption, and bondholders always benefit because principal repayment on the scheduled maturity date is guaranteed.

Question 17

You purchased an annual interest coupon bond one year ago that had six years remaining to maturity at that time.The coupon interest rate was 10%, and the par value was $1,000.At the time you purchased the bond, the yield to maturity was 8%.If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been

Accepted Answer

A) 7.00%. 
B) 7.82%. 
C) 8.00%. 
D) 11.95%. 
A) 7.00%. 
B) 7.82%. 
C) 8.00%. 
D) 11.95%.

Question 18

A zero-coupon bond is one that

Accepted Answer

A) effectively has a zero-percent coupon rate. 
B) pays interest to the investor based on the general level of interest rates rather than at a specified coupon rate. 
C) pays interest to the investor without requiring the actual coupon to be mailed to the corporation. 
D) is issued by state governments because they don't have to pay interest. 
A) effectively has a zero-percent coupon rate. 
B) pays interest to the investor based on the general level of interest rates rather than at a specified coupon rate. 
C) pays interest to the investor without requiring the actual coupon to be mailed to the corporation. 
D) is issued by state governments because they don't have to pay interest.

Question 19

Consider a $1,000-par-value 20-year zero-coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%, the imputed interest income for the first year of that bond is

Accepted Answer

A) zero. 
B) $14.87. 
C) $45.85. 
D) $7.44. 
A) zero. 
B) $14.87. 
C) $45.85. 
D) $7.44.

Question 20

A ___________ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specified price after a specific date.

Accepted Answer

A) callable 
B) coupon 
C) put 
D) Treasury 
A) callable 
B) coupon 
C) put 
D) Treasury

Exam 14: Bond Prices and Yields

A 7.5% coupon bond with an ask price of $100.00 pays interest every 182 days.If the bond paid interest 62 days ago, the invoice price of the bond would be

An 8% coupon U.S.Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15.The accrued interest on the $100,000 face value of this note is

A coupon bond that pays interest annually has a par value of $1,000, matures in five years, and has a yield to maturity of 10%.The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

A 9% coupon bond with an ask price of 100:00 pays interest every 182 days.If the bond paid interest 112 days ago, the invoice price of the bond would be

A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%, the invoice price of the bond will be

If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago, the accrued interest would be

A credit default swap is

If a 6% coupon bond is trading for $950.00, it has a current yield of

A convertible bond has a par value of $1,000 and a current market price of $850.The current price of the issuing firm's stock is $29, and the conversion ratio is 30 shares.The bond's market conversion value is

One year ago, you purchased a newly-issued TIPS bond that has a 4% coupon rate, five years to maturity, and a par value of $1,000.The average inflation rate over the year was 3.6%.What is the amount of the coupon payment you will receive, and what is the current face value of the bond?

The bond indenture includes

A 7% coupon bond with an ask price of $100.00 pays interest every 182 days.If the bond paid interest 32 days ago, the invoice price of the bond would be

Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%.If interest rates remain constant, one year from now, the price of this bond will be

Ceteris paribus, the price and yield on a bond are

When a bond indenture includes a sinking fund provision,

A zero-coupon bond is one that

Consider a $1,000-par-value 20-year zero-coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%, the imputed interest income for the first year of that bond is

A ___________ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specified price after a specific date.

The Investment Environment

Financial Markets, Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioural Finance and Technical Analysis

Empirical Evidence on Security Returns

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters