Exam 6: Interest Rates and Bond Valuation

The 7 percent semiannual coupon bonds of Over The Counter, Inc., are selling for $1,102.25.The bonds have a face value of $1,000 and mature in 18 years.What is the yield to maturity?

The 5.3 percent bond of Dominic Cyle Parts has a face value of $1,000, a maturity of 12 years, semiannual interest payments, and a yield to maturity of 6.12 percent.What is the current market price of the bond?

Which one of the following terms applies to a bond that initially sells at a deep discount and only makes one payment to bondholders?

The current yield on a bond is equal to the annual interest divided by the:

The inflation premium:

Keyser Materials has 6.5 percent coupon bonds on the market with 15 years to maturity.The bonds make semiannual payments and currently sell for 102 percent of par.What is the current yield? The YTM? The effective annual yield?

A real rate of return is defined as a rate that has been adjusted for which one of the following?

Which one of the following statements concerning sinking funds is correct?

Today, you are buying a $1,000 face value bond at an invoice price of $987.The bond has a coupon rate of 6 percent and pays interest semiannually.There are two months until the next coupon date.What is the clean price of this bond?

Generally speaking, bonds issued in the U.S.pay interest on a(n) _____ basis.

What is the price of a $1,000 face value bond if the quoted price is 102.1?

Which one of the following represents additional compensation provided to bondholders to offset the possibility that the bond issuer might not pay the interest and/or principal payments as expected?

Last year, you earned a rate of return of 5.89 percent on your bond investments.During that time, the inflation rate was 1.2 percent.What was your real rate of return?

If Treasury bills are currently paying 3.05 percent and the inflation rate is 1.89 percent, what is the approximate real rate of interest? The exact real rate?

Which one of the following might be included in a bond's list of negative covenants?

You purchase a bond with a coupon rate of 6.15 percent, semiannual coupons, and a clean price of $998.40.If the next coupon payment is due in two months, what is the invoice price?

A bond has a yield to maturity of 9.38 percent, a coupon of 7.5 percent paid semiannually, a $1,000 face value, and a maturity date 21 years from today.What is the current yield?

An upward-sloping term structure of interest rates indicates:

A $1,000 face value bond currently has a yield to maturity of 6.03 percent.The bond matures in thirteen years and pays interest semiannually.The coupon rate is6.25percent.What is the current price of this bond?

Russell's has a bond issue outstanding.The issue's indenture provision prohibits the firm from redeeming the bonds during the first five years following issuance.This provision is referred to as the _____ provision.