Exam 10: Bond Prices and Yields

Consider a newly issued TIPS bond with a three year maturity, par value of $1000, and a coupon rate of 5%. Assume annual coupon payments. -What is the real rate of return on the TIPS bond in the first year?

(Multiple Choice)

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Question 21

A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000.If the bond matures in 16 years,it should sell for a price of __________ today.

(Multiple Choice)

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Question 22

Bonds issued in the U.S.are and most bonds issued overseas are _.

(Multiple Choice)

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Question 23

You would typically find all but which one of the following in a bond contract?

(Multiple Choice)

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Question 24

Yields on municipal bonds are generally lower than yields on similar corporate bonds because of differences in _________.

(Multiple Choice)

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Question 25

Bonds rated _____ or better by Standard and Poor's are considered investment grade.

(Multiple Choice)

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Question 26

A coupon bond which pays interest of 4% annually,has a par value of $1,000,matures in 5 years,and is selling today at $785.The actual yield to maturity on this bond is _________.

(Multiple Choice)

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Question 27

Under the pure expectations hypothesis and constant real interest rates for different maturities,an upward sloping yield curve would indicate __________________.

(Multiple Choice)

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Question 28

The yield to maturity on a bond is ________. I.above the coupon rate when the bond sells at a discount,and below the coupon rate when the bond sells at a premium II.the discount rate that will set the present value of the payments equal to the bond price III.equal to the true compound return on investment only if all interest payments received are reinvested at the yield to maturity

(Multiple Choice)

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Question 29

Serial bonds are associated with _________.

(Multiple Choice)

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Question 30

Bonds with coupon rates that fall when the general level of interest rates rise are called _____________.

(Multiple Choice)

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Question 31

If the quote for a Treasury bond is listed in the newspaper as 99:08 bid,99:11 ask,the actual price you can sell this bond given a $10,000 par value is _____________.

(Multiple Choice)

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(95)

Question 32

A corporate bond has a 10 year maturity and pays interest semiannually.The quoted coupon rate is 6% and the bond is priced at par.The bond is callable in 3 years at 110% of par.What is the bond's yield to call?

(Multiple Choice)

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(81)

Question 33

The bonds of Elbow Grease Dishwashing Company have received a rating of "C" by Moody's.The "C" rating indicates the bonds are _________.

(Multiple Choice)

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Question 34

Analysis of bond returns over a multiyear horizon based on forecasts of the bond's yield to maturity and reinvestment rate of coupons is called ______.

(Multiple Choice)

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(79)

Question 35

One,two and three year maturity,default-free,zero-coupon bonds have yields-to-maturity of 7%,8% and 9% respectively.What is the implied one-year forward rate,one year from today?

(Multiple Choice)

4.9/5

(68)

Question 36

A bond was purchased at a premium and is now selling at a discount because of a change in market interest rates.If the bond pays a 4% annual coupon,what is the likely impact on the holding period return in an investor decides to sell now?

(Multiple Choice)

4.9/5

(86)

Question 37

If you are holding a premium bond you must expect a _ each year until maturity.If you are holding a discount bond you must expect a _ each year until maturity.

(Multiple Choice)

4.8/5

(74)

Question 38

Consider the liquidity preference theory of the term structure of interest rates.On average,one would expect investors to require _________.

(Multiple Choice)

4.8/5

(78)

Question 39

Consider the expectations theory of the term structure of interest rates.If the yield curve is downward sloping,this indicates that investors expect short-term interest rates to __________ in the future.

(Multiple Choice)

4.8/5

(94)

Question 40

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Exam 10: Bond Prices and Yields

Consider a newly issued TIPS bond with a three year maturity, par value of $1000, and a coupon rate of 5%. Assume annual coupon payments. -What is the real rate of return on the TIPS bond in the first year?

A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000.If the bond matures in 16 years,it should sell for a price of __________ today.

Bonds issued in the U.S.are __________ and most bonds issued overseas are ___________.

You would typically find all but which one of the following in a bond contract?

Yields on municipal bonds are generally lower than yields on similar corporate bonds because of differences in _________.

Bonds rated _____ or better by Standard and Poor's are considered investment grade.

A coupon bond which pays interest of 4% annually,has a par value of $1,000,matures in 5 years,and is selling today at $785.The actual yield to maturity on this bond is _________.

Under the pure expectations hypothesis and constant real interest rates for different maturities,an upward sloping yield curve would indicate __________________.

Serial bonds are associated with _________.

Bonds with coupon rates that fall when the general level of interest rates rise are called _____________.

If the quote for a Treasury bond is listed in the newspaper as 99:08 bid,99:11 ask,the actual price you can sell this bond given a $10,000 par value is _____________.

A corporate bond has a 10 year maturity and pays interest semiannually.The quoted coupon rate is 6% and the bond is priced at par.The bond is callable in 3 years at 110% of par.What is the bond's yield to call?

The bonds of Elbow Grease Dishwashing Company have received a rating of "C" by Moody's.The "C" rating indicates the bonds are _________.

Analysis of bond returns over a multiyear horizon based on forecasts of the bond's yield to maturity and reinvestment rate of coupons is called ______.

One,two and three year maturity,default-free,zero-coupon bonds have yields-to-maturity of 7%,8% and 9% respectively.What is the implied one-year forward rate,one year from today?

A bond was purchased at a premium and is now selling at a discount because of a change in market interest rates.If the bond pays a 4% annual coupon,what is the likely impact on the holding period return in an investor decides to sell now?

If you are holding a premium bond you must expect a _______ each year until maturity.If you are holding a discount bond you must expect a _______ each year until maturity.

Consider the liquidity preference theory of the term structure of interest rates.On average,one would expect investors to require _________.

Consider the expectations theory of the term structure of interest rates.If the yield curve is downward sloping,this indicates that investors expect short-term interest rates to __________ in the future.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk and Return: Past and Prologue

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Portfolio Performance Evaluation

Globalization and International Investing

Hedge Funds

Taxes,inflation,and Investment Strategy

Investors and the Investment Process

Filters

Bonds issued in the U.S.are and most bonds issued overseas are _.

If you are holding a premium bond you must expect a _ each year until maturity.If you are holding a discount bond you must expect a _ each year until maturity.