Question 1

Periodically rebalancing a portfolio so that the duration continues to match the target date is called:

Accepted Answer

A) risk assessment. 
B) duration testing. 
C) dedication matching. 
D) portfolio matching. 
E) dynamic immunization. 
A) risk assessment. 
B) duration testing. 
C) dedication matching. 
D) portfolio matching. 
E) dynamic immunization. E

Question 2

One year ago, you purchased a $1,000 face value bond at a yield to maturity of 9.45%. The bond has a 9% coupon and pays interest semiannually. When you purchased the bond, it had 12 years left until maturity. You are selling the bond today when the yield to maturity is 8.20%. What is your realized yield on this bond?

Accepted Answer

A) 14.54% 
B) 15.27% 
C) 16.35% 
D) 17.60% 
E) 18.11% 
A) 14.54% 
B) 15.27% 
C) 16.35% 
D) 17.60% 
E) 18.11% E

Question 3

Which one of the following does an issuer pay to redeem a bond prior to maturity?

Accepted Answer

A) par value 
B) face value 
C) put price 
D) call price 
E) discounted price 
A) par value 
B) face value 
C) put price 
D) call price 
E) discounted price D

Question 4

The price of a bond decreased by 1.45% in response to an increase in the yield to maturity from 7.2% to 7.6%. What is the bond's Macaulay duration?

Accepted Answer

A) 3.39 years 
B) 3.76 years 
C) 3.92 years 
D) 4.04 years 
E) 4.16 years 
A) 3.39 years 
B) 3.76 years 
C) 3.92 years 
D) 4.04 years 
E) 4.16 years

Question 5

The Country Inn has bonds outstanding with a par value of $1,000 each and a 5.25% coupon. The bonds mature in 8.5 years and pay interest semiannually. What is the current value of each of these bonds if the yield to maturity is 6.0%?

Accepted Answer

A) $938.40 
B) $950.63 
C) $988.55 
D) $1,004.36 
E) $1,009.47 
A) $938.40 
B) $950.63 
C) $988.55 
D) $1,004.36 
E) $1,009.47

Question 6

The rate of return an investor actually earns from owning a bond is called which one of the following?

Accepted Answer

A) market return 
B) realized yield 
C) annualized coupon yield 
D) maturity yield 
E) call yield 
A) market return 
B) realized yield 
C) annualized coupon yield 
D) maturity yield 
E) call yield

Question 7

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is ________%, the current yield is ________%, and the yield to maturity is ________%.

Accepted Answer

A) 6.90; 6.57; 6.67 
B) 6.90; 6.73; 6.71 
C) 6.90; 6.97; 7.02 
D) 7.00; 7.37; 7.07 
E) 7.00; 7.67; 7.21 
A) 6.90; 6.57; 6.67 
B) 6.90; 6.73; 6.71 
C) 6.90; 6.97; 7.02 
D) 7.00; 7.37; 7.07 
E) 7.00; 7.67; 7.21

Question 8

A 5.5% coupon bond has a face value of $1,000 and a current yield of 5.64%. What is the current market price?

Accepted Answer

A) $975.18 
B) $989.18 
C) $1,011.82 
D) $3,933.43 
E) $4,067.47 
A) $975.18 
B) $989.18 
C) $1,011.82 
D) $3,933.43 
E) $4,067.47

Question 9

You own a 7.5%, semiannual coupon bond that matures in 10 years. The par value is $1,000 and the current yield to maturity is 6.5%. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Accepted Answer

A) −3.25% 
B) −3.30% 
C) −3.35% 
D) −3.40% 
E) −3.47% 
A) −3.25% 
B) −3.30% 
C) −3.35% 
D) −3.40% 
E) −3.47%

Question 10

Which one of the following will occur if a bond's discount rate is lowered?

Accepted Answer

A) market price will increase 
B) coupon payment amount will decrease 
C) current yield will increase 
D) call premium will increase 
E) coupon rate will decrease 
A) market price will increase 
B) coupon payment amount will decrease 
C) current yield will increase 
D) call premium will increase 
E) coupon rate will decrease

Question 11

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates?
I. low coupon rates
II. high coupon rates
III. short time to maturity
IV. long time to maturity

Accepted Answer

A) III only 
B) I and III only 
C) I and IV only 
D) II and III only 
E) II and IV only 
A) III only 
B) I and III only 
C) I and IV only 
D) II and III only 
E) II and IV only

Question 12

A 7.0% coupon bond pays interest semiannually and has 10 years to maturity. The bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?

Accepted Answer

A) 8.16% 
B) 8.86% 
C) 8.89% 
D) 10.43% 
E) 11.21% 
A) 8.16% 
B) 8.86% 
C) 8.89% 
D) 10.43% 
E) 11.21%

Question 13

A premium bond is defined as a bond that:

Accepted Answer

A) has a duration that is less than one. 
B) has a face value that exceeds its market value. 
C) is callable at a price which exceeds the face value. 
D) has a market price that exceeds par value. 
E) is selling for less than face value. 
A) has a duration that is less than one. 
B) has a face value that exceeds its market value. 
C) is callable at a price which exceeds the face value. 
D) has a market price that exceeds par value. 
E) is selling for less than face value.

Question 14

You are considering two bonds. Both have semiannual, 6% coupons, $1,000 face values, and yields to maturity of 6.5%. Bond S matures in 5 years and Bond L matures in 10 years. What is the difference in the current prices of these bonds?

Accepted Answer

A) $12.51 
B) $12.67 
C) $13.52 
D) $14.67 
E) $15.29 
A) $12.51 
B) $12.67 
C) $13.52 
D) $14.67 
E) $15.29

Question 15

A $1,000 face value bond has a 9.0% coupon and pays interest semiannually. The bond matures in 2 years and has a yield to maturity of 6.5%. What is the Macaulay duration?

Accepted Answer

A) 1.18 years 
B) 1.65 years 
C) 1.88 years 
D) 2.03 years 
E) 2.19 years 
A) 1.18 years 
B) 1.65 years 
C) 1.88 years 
D) 2.03 years 
E) 2.19 years

Question 16

A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5%, and a market price of $982. What is the yield to maturity?

Accepted Answer

A) 3.86% 
B) 4.01% 
C) 4.08% 
D) 7.53% 
E) 7.70% 
A) 3.86% 
B) 4.01% 
C) 4.08% 
D) 7.53% 
E) 7.70%

Question 17

A bond has a par value of $1,000 and a coupon rate of 6.5%. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds?

Accepted Answer

A) $180 
B) $260 
C) $320 
D) $420 
E) $840 
A) $180 
B) $260 
C) $320 
D) $420 
E) $840

Question 18

A $1,000 par value 5.0% Treasury bond pays interest semiannually and matures in 9 years. What is the yield to maturity if the bond is currently quoted at a price of 105.0?

Accepted Answer

A) 3.54% 
B) 3.68% 
C) 4.28% 
D) 4.32% 
E) 4.54% 
A) 3.54% 
B) 3.68% 
C) 4.28% 
D) 4.32% 
E) 4.54%

Question 19

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Accepted Answer

A) change in yield to call due to passage of one year 
B) change in yield to maturity of one percent 
C) change in yield to maturity of one basis point 
D) change in coupon rate of one percent 
E) change in coupon rate of one basis point 
A) change in yield to call due to passage of one year 
B) change in yield to maturity of one percent 
C) change in yield to maturity of one basis point 
D) change in coupon rate of one percent 
E) change in coupon rate of one basis point

Question 20

A $1,000 par value bond is currently valued at $1,050. The bond pays interest semiannually, has 9 years to maturity, and has a yield to maturity of 7.72%. The coupon rate is ________% and the current yield is ________%.

Accepted Answer

A) 7.80; 6.21 
B) 8.00; 7.31 
C) 8.00; 7.51 
D) 8.08; 7.66 
E) 8.50; 8.10 
A) 7.80; 6.21 
B) 8.00; 7.31 
C) 8.00; 7.51 
D) 8.08; 7.66 
E) 8.50; 8.10

Periodically rebalancing a portfolio so that the duration continues to match the target date is called:

Which one of the following does an issuer pay to redeem a bond prior to maturity?

The price of a bond decreased by 1.45% in response to an increase in the yield to maturity from 7.2% to 7.6%. What is the bond's Macaulay duration?

The Country Inn has bonds outstanding with a par value of $1,000 each and a 5.25% coupon. The bonds mature in 8.5 years and pay interest semiannually. What is the current value of each of these bonds if the yield to maturity is 6.0%?

The rate of return an investor actually earns from owning a bond is called which one of the following?

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is %, the current yield is %, and the yield to maturity is %.

A 5.5% coupon bond has a face value of $1,000 and a current yield of 5.64%. What is the current market price?

You own a 7.5%, semiannual coupon bond that matures in 10 years. The par value is $1,000 and the current yield to maturity is 6.5%. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Which one of the following will occur if a bond's discount rate is lowered?

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates? I. low coupon rates II. high coupon rates III. short time to maturity IV. long time to maturity

A 7.0% coupon bond pays interest semiannually and has 10 years to maturity. The bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?

A premium bond is defined as a bond that:

You are considering two bonds. Both have semiannual, 6% coupons, $1,000 face values, and yields to maturity of 6.5%. Bond S matures in 5 years and Bond L matures in 10 years. What is the difference in the current prices of these bonds?

A $1,000 face value bond has a 9.0% coupon and pays interest semiannually. The bond matures in 2 years and has a yield to maturity of 6.5%. What is the Macaulay duration?

A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5%, and a market price of $982. What is the yield to maturity?

A bond has a par value of $1,000 and a coupon rate of 6.5%. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds?

A $1,000 par value 5.0% Treasury bond pays interest semiannually and matures in 9 years. What is the yield to maturity if the bond is currently quoted at a price of 105.0?

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

A $1,000 par value bond is currently valued at $1,050. The bond pays interest semiannually, has 9 years to maturity, and has a yield to maturity of 7.72%. The coupon rate is % and the current yield is %.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 10: Bond Prices and Yields

Periodically rebalancing a portfolio so that the duration continues to match the target date is called:

Which one of the following does an issuer pay to redeem a bond prior to maturity?

The price of a bond decreased by 1.45% in response to an increase in the yield to maturity from 7.2% to 7.6%. What is the bond's Macaulay duration?

The Country Inn has bonds outstanding with a par value of $1,000 each and a 5.25% coupon. The bonds mature in 8.5 years and pay interest semiannually. What is the current value of each of these bonds if the yield to maturity is 6.0%?

The rate of return an investor actually earns from owning a bond is called which one of the following?

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is ________%, the current yield is ________%, and the yield to maturity is ________%.

A 5.5% coupon bond has a face value of $1,000 and a current yield of 5.64%. What is the current market price?

You own a 7.5%, semiannual coupon bond that matures in 10 years. The par value is $1,000 and the current yield to maturity is 6.5%. What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Which one of the following will occur if a bond's discount rate is lowered?

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates? I. low coupon rates II. high coupon rates III. short time to maturity IV. long time to maturity

A 7.0% coupon bond pays interest semiannually and has 10 years to maturity. The bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?

A premium bond is defined as a bond that:

You are considering two bonds. Both have semiannual, 6% coupons, $1,000 face values, and yields to maturity of 6.5%. Bond S matures in 5 years and Bond L matures in 10 years. What is the difference in the current prices of these bonds?

A $1,000 face value bond has a 9.0% coupon and pays interest semiannually. The bond matures in 2 years and has a yield to maturity of 6.5%. What is the Macaulay duration?

A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5%, and a market price of $982. What is the yield to maturity?

A bond has a par value of $1,000 and a coupon rate of 6.5%. What is the dollar amount of each semiannual interest payment if you own 8 of these bonds?

A $1,000 par value 5.0% Treasury bond pays interest semiannually and matures in 9 years. What is the yield to maturity if the bond is currently quoted at a price of 105.0?

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

A $1,000 par value bond is currently valued at $1,050. The bond pays interest semiannually, has 9 years to maturity, and has a yield to maturity of 7.72%. The coupon rate is ________% and the current yield is ________%.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Corporate and Government Bonds

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest. The par value is $1,000 per bond and the market value is $990. The coupon rate is %, the current yield is %, and the yield to maturity is %.

A $1,000 par value bond is currently valued at $1,050. The bond pays interest semiannually, has 9 years to maturity, and has a yield to maturity of 7.72%. The coupon rate is % and the current yield is %.