Question 1

A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT?

Accepted Answer

A)  The bond's coupon rate exceeds its current yield. 
B)  The bond's current yield exceeds its yield to maturity. 
C)  The bond's yield to maturity is greater than its coupon rate. 
D)  The bond's current yield is equal to its coupon rate. 
E)  If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850. 
A)  The bond's coupon rate exceeds its current yield. 
B)  The bond's current yield exceeds its yield to maturity. 
C)  The bond's yield to maturity is greater than its coupon rate. 
D)  The bond's current yield is equal to its coupon rate. 
E)  If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850.

Question 2

Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more interest rate price risk if you purchased a 30-day bond than if you bought a 30-year bond.

Accepted Answer

A) True 
 B)False

Question 3

The desire for floating-rate bonds, and consequently their increased usage, arose out of the experience of the early 1980s, when inflation pushed interest rates up to high levels and thus caused sharp declines in the prices of outstanding bonds.

Accepted Answer

A) True 
 B)False

A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT?

Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more interest rate price risk if you purchased a 30-day bond than if you bought a 30-year bond.

The desire for floating-rate bonds, and consequently their increased usage, arose out of the experience of the early 1980s, when inflation pushed interest rates up to high levels and thus caused sharp declines in the prices of outstanding bonds.

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles

Mergers and Acquisitions

Financial Management and Stock Equilibrium

Filters

Exam 7: Bonds and Their Valuation

A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT?

Because short-term interest rates are much more volatile than long-term rates, you would, in the real world, generally be subject to much more interest rate price risk if you purchased a 30-day bond than if you bought a 30-year bond.

The desire for floating-rate bonds, and consequently their increased usage, arose out of the experience of the early 1980s, when inflation pushed interest rates up to high levels and thus caused sharp declines in the prices of outstanding bonds.

An Overview of Financial Management

Financial Markets and Institutions

Financial Statements, Cash Flow, and Taxes

Analysis of Financial Statements

Time Value of Money

Bonds and Their Valuation

Risk and Rates of Return

Stocks and Their Valuation

The Cost of Capital

The Basics of Capital Budgeting

Cash Flow Estimation and Risk Analysis

Real Options and Other Topics in Capital Budgeting

Capital Structure and Leverage

Distributions to Shareholders: Dividends and

Working Capital Management

Financial Planning and Forecasting

Derivatives and Risk Management

Multinational Financial Management

Hybrid Financing: Preferred Stock, Leasing, Warrants, and Convertibles

Mergers and Acquisitions

Financial Management and Stock Equilibrium

Filters