Exam 6: Bonds Debtcharacteristics and Valuation

Commercial paper is a type of:

Floating-rate debt is advantageous to investors because the interest rate moves up if market rates rise.

An investor is contemplating the purchase of a 20-year bond that pays $50 interest every six months. The investor plans to hold the bond only for 10 years, at which time she will sell it in the marketplace. She requires a 12 percent annual return but believes the market will require only an 8 percent return when she sells the bond 10 years from now. Assuming she is a rational investor, how much should she be willing to pay for the bond today? (Round the answer to two decimal places.)

The financial pages of the local newspaper helped Mary in identifying that she can buy a bond ($1,000 par) for $800. If the coupon rate is 10 percent, the annual interest payments equal $80.

Which of the following statements is true of the yield to maturity for a bond?

Which of the following statements is true about federal funds?

If there are two bonds with a simple interest rate yield of 9%, and one bond is compounded quarterly while the other bond is compounded monthly, then the bond compounded quarterly will have a higher effective annual yield.

Eurobonds are typically issued as registered bonds rather than bearer bonds.

Eurobonds have a higher level of required disclosure than normally applies to bonds issued in domestic markets, particularly in the United States.

Bonds issued by BB&C Communications that have a coupon rate of interest equal to 10.65 percent currently have a yield to maturity (YTM) equal to 15.25 percent. Based on this information, it is understood that BB&C's bonds must currently be selling at _____ in the financial markets.

The longer the maturity of the bond, the more significantly its price changes in response to a given change in interest rates.

The percentage rate of return that investors earn on a bond consists of a(n):

The computation for the yield to call (YTC) is the same as that for the yield to maturity (YTM), except that we substitute the _____ of the bond for the maturity (par) value.

Which of the following events would make it less likely for a company to choose to call its outstanding callable bonds?

The conversion ratio is:

JRJ Corporation issued 10-year bonds at a price of $1,000. These bonds pay $60 interest every six months. Their price has remained the same since they were issued; that is, the bonds still sell for $1,000. Due to additional financing needs, the firm wishes to issue new bonds that would have a maturity of 10 years and a par value of $1,000 and pay $40 interest every six months. If both bonds have the same yield, how many new bonds must JRJ issue to raise $2,000,000 cash? (Round the value of the bond to two decimal places and the number of bonds to the nearest whole number.)

Call provisions on corporate bonds are generally included to protect the issuer against large increases in interest rates. They affect the actual maturity of the bond but not its price.

Revenue bonds are used to:

Which of the following statements is true about foreign bonds?

On the maturity date, _____.