Question 1

A bond with semi-annual coupon payments of $1,200 has three years to maturity and a yield to maturity of 10%.If the price of this bond is $20,467.11,what is its face value?

Accepted Answer

A)  $27,000 
B)  $15,240.80 
C)  $12,000 
D)  $15,377.24 
E)  $20,467.11 
A)  $27,000 
B)  $15,240.80 
C)  $12,000 
D)  $15,377.24 
E)  $20,467.11

Question 2

How much will the coupon payments be of a 30-year $10,000 bond with a 4.5% coupon rate and semi-annual payments?

Accepted Answer

A)  $30 
B)  $225 
C)  $350 
D)  $450 
E)  $45 
A)  $30 
B)  $225 
C)  $350 
D)  $450 
E)  $45

Question 3

Why are the interest rates of Government of Canada notes less than the interest rates of equivalent corporate bonds?

Accepted Answer

A)  The Canadian government has a high credit spread. 
B)  There is significant risk that the Canadian government will default. 
C)  Canadian government securities are widely regarded to be risk-free. 
D)  Canadian government securities are generally used to determine interest rates. 
E)  Canadian government securities have a larger supply and thus a lower price. 
A)  The Canadian government has a high credit spread. 
B)  There is significant risk that the Canadian government will default. 
C)  Canadian government securities are widely regarded to be risk-free. 
D)  Canadian government securities are generally used to determine interest rates. 
E)  Canadian government securities have a larger supply and thus a lower price.

Question 4

Bonds with a high risk of default generally offer high yields.

Accepted Answer

A) True 
 B)False

Question 5

The face value of a 30-year coupon bond is $100,000.If it pays $1,500 every 3 months,what is its coupon rate?

Accepted Answer

A)  1.5% 
B)  0.06% 
C)  6% 
D)  4.5% 
E)  15% 
A)  1.5% 
B)  0.06% 
C)  6% 
D)  4.5% 
E)  15%

Question 6

A university issues a bond with a face value of $10,000 and a coupon rate of 5.65% that matures on 07/15/2020.The holder of such a bond receives coupon payments of $282.50.How frequently are coupon payments made in this case?

Accepted Answer

A)  monthly 
B)  quarterly 
C)  semi-annually 
D)  annually 
E)  biannually 
A)  monthly 
B)  quarterly 
C)  semi-annually 
D)  annually 
E)  biannually

Question 7

The yields to maturity on a number of one-year,zero-coupon securities are shown in the table above.What is the credit spread on a one-year,zero-coupon corporate bond with an A rating?

Accepted Answer

A)  4.7% 
B)  2% 
C)  1.2% 
D)  0.4% 
E)  0.8% 
A)  4.7% 
B)  2% 
C)  1.2% 
D)  0.4% 
E)  0.8%

Question 8

How much will the coupon payments be of a 10-year $10,000 bond with a 3% coupon rate and semi-annual payments?

Accepted Answer

A)  $150 
B)  $120 
C)  $100 
D)  $300 
E)  $600 
A)  $150 
B)  $120 
C)  $100 
D)  $300 
E)  $600

Question 9

A zero-coupon bond with a $1000 face value has 7 years left until maturity.If its current price is $786,then the yield to maturity on this bond is approximately:

Accepted Answer

A)  3.5% 
B)  1.27% 
C)  1.03% 
D)  0.035% 
E)  7% 
A)  3.5% 
B)  1.27% 
C)  1.03% 
D)  0.035% 
E)  7%

Question 10

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:

Accepted Answer

A)  $1000 
B)  $602 
C)  $1040 
D)  $372 
E)  $906 
A)  $1000 
B)  $602 
C)  $1040 
D)  $372 
E)  $906

Question 11

Shown above is information from FINRA regarding one of Caterpillar Financial Services' bonds.How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid annually?

Accepted Answer

A)  $1.38 
B)  $3.95 
C)  $4.00 
D)  $4.36 
E)  $5.17 
A)  $1.38 
B)  $3.95 
C)  $4.00 
D)  $4.36 
E)  $5.17

Question 12

Use the information for the question(s) below.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semi-annually.
-Assuming that this bond trades for $1035.44,then what is the YTM for this bond?

Accepted Answer

FV = 1000
PMT = 40 (

Question 13

The coupon value of a bond is the face value of that bond.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following best shows the timeline for cash flows from a five-year bond with a face value of $2,000,a coupon rate of 4.2%,and semi-annual payments?

Accepted Answer

A)   
B)   
C)   
D)   
E)   
A)   
B)   
C)   
D)   
E)

Question 15

Consolidated Insurance wants to raise $35 million in order to build a new headquarters.The company will fund this by issuing 10-year bonds with a face value of $1,000 and a coupon rating of 6.5%,paid semi-annually.The above table shows the yield to maturity for similar 10-year corporate bonds of different ratings.Which of the following is closest to how many more bonds Consolidated Insurance would have to sell to raise this money if their bonds received an A rating rather than an AA rating?

Accepted Answer

A)  686 
B)  750 
C)  765 
D)  1156 
E)  872 
A)  686 
B)  750 
C)  765 
D)  1156 
E)  872

Question 16

A $3000 bond with a coupon rate of 7.2% paid semi-annually has six years to maturity and a yield to maturity of 4.6%.If interest rates fall and the yield to maturity decreases by 0.4%,what will happen to the price of the bond?

Accepted Answer

A)  rise by $24.13 
B)  rise by $54.77 
C)  fall by $68.04 
D)  fall by $67.71 
E)  fall by $48.65 
A)  rise by $24.13 
B)  rise by $54.77 
C)  fall by $68.04 
D)  fall by $67.71 
E)  fall by $48.65

Question 17

Bond A and Bond B are both zero-coupon,risk-free bonds.They both have the same yield to maturity and face value.However,they have different maturity dates.Using the information in the above table,what is the Price of Bond B?

Accepted Answer

A)  $1,000 
B)  $620.92 
C)  $1,610.51 
D)  $500 
E)  $385.54 
A)  $1,000 
B)  $620.92 
C)  $1,610.51 
D)  $500 
E)  $385.54

Question 18

Why do bond prices fall as interest rates rise?

Accepted Answer

When interest rates increase i

Question 19

A firm issues ten-year bonds with a coupon rate of 6.5%,paid semi-annually.The credit spread for this firm's ten-year debt is 0.8%.New ten-year Treasury notes are being issued at par with a coupon rate of 5%.What should the price of the firm's outstanding ten-year bonds be per $100 of face value?

Accepted Answer

A)  $97.28 
B)  $98.27 
C)  $100.86 
D)  $105.26 
E)  $105.80 
A)  $97.28 
B)  $98.27 
C)  $100.86 
D)  $105.26 
E)  $105.80

Question 20

Why do bond prices increase as the next coupon payment gets closer?

Accepted Answer

As the next payment from a bon

Exam 6: Bonds

A bond with semi-annual coupon payments of $1,200 has three years to maturity and a yield to maturity of 10%.If the price of this bond is $20,467.11,what is its face value?

How much will the coupon payments be of a 30-year $10,000 bond with a 4.5% coupon rate and semi-annual payments?

Why are the interest rates of Government of Canada notes less than the interest rates of equivalent corporate bonds?

Bonds with a high risk of default generally offer high yields.

The face value of a 30-year coupon bond is $100,000.If it pays $1,500 every 3 months,what is its coupon rate?

A university issues a bond with a face value of $10,000 and a coupon rate of 5.65% that matures on 07/15/2020.The holder of such a bond receives coupon payments of $282.50.How frequently are coupon payments made in this case?

The yields to maturity on a number of one-year,zero-coupon securities are shown in the table above.What is the credit spread on a one-year,zero-coupon corporate bond with an A rating?

How much will the coupon payments be of a 10-year $10,000 bond with a 3% coupon rate and semi-annual payments?

A zero-coupon bond with a $1000 face value has 7 years left until maturity.If its current price is $786,then the yield to maturity on this bond is approximately:

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:

Shown above is information from FINRA regarding one of Caterpillar Financial Services' bonds.How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid annually?

The coupon value of a bond is the face value of that bond.

Which of the following best shows the timeline for cash flows from a five-year bond with a face value of $2,000,a coupon rate of 4.2%,and semi-annual payments?

A $3000 bond with a coupon rate of 7.2% paid semi-annually has six years to maturity and a yield to maturity of 4.6%.If interest rates fall and the yield to maturity decreases by 0.4%,what will happen to the price of the bond?

Bond A and Bond B are both zero-coupon,risk-free bonds.They both have the same yield to maturity and face value.However,they have different maturity dates.Using the information in the above table,what is the Price of Bond B?

Why do bond prices fall as interest rates rise?

A firm issues ten-year bonds with a coupon rate of 6.5%,paid semi-annually.The credit spread for this firm's ten-year debt is 0.8%.New ten-year Treasury notes are being issued at par with a coupon rate of 5%.What should the price of the firm's outstanding ten-year bonds be per $100 of face value?

Why do bond prices increase as the next coupon payment gets closer?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

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