Question 1

A $10,000 bond with a coupon rate of 5% paid semi-annually has five years to maturity and a yield to maturity of 3%.What is the price of this bond?

Accepted Answer

A)  $9,771.01 
B)  $2,132.55 
C)  $7,440.94 
D)  $9,573.49 
E)  $10,915.94 
A)  $9,771.01 
B)  $2,132.55 
C)  $7,440.94 
D)  $9,573.49 
E)  $10,915.94

Question 2

Under what situation can a zero-coupon bond be selling at a premium?

Accepted Answer

Unlike a coupon bond,a zero-coupon bond

Question 3

What is the coupon rate of a 10-year $4,000 bond with annual coupon payments of $100?

Accepted Answer

A)  2.5% 
B)  4% 
C)  5% 
D)  10% 
E)  25% 
A)  2.5% 
B)  4% 
C)  5% 
D)  10% 
E)  25%

Question 4

A coupon bond with a face value of $25,000 and quarterly coupon payments has five years to maturity and a yield to maturity of 5%.If the current price is $10,980,what is the coupon rate?

Accepted Answer

A)  2% 
B)  4.39% 
C)  0.5% 
D)  0% 
E)  5% 
A)  2% 
B)  4.39% 
C)  0.5% 
D)  0% 
E)  5%

Question 5

The only cash payment an investor in a zero-coupon bond receives is the face value of the bond on its maturity date.

Accepted Answer

A) True 
 B)False

Question 6

Based on Figure 6.5, which of the following is least likely to default?

Accepted Answer

A)  Bell Canada Enterprises 
B)  Province of British Columbia 
C)  Government of Canada 
D)  All of the above 
E)  None of the above 
A)  Bell Canada Enterprises 
B)  Province of British Columbia 
C)  Government of Canada 
D)  All of the above 
E)  None of the above

Question 7

Lloyd Industries raised $28 million in order to upgrade its roller kiln furnace for the production of ceramic tile.The company funded this by issuing 15-year bonds with a face value of $1000 and a coupon rating of 6.2%,paid annually.The above table shows the yield to maturity for similar 15-year corporate bonds of different ratings issued at the same time.When Lloyd Industries issued their bonds,they received a price of $962.63.Which of the following is most likely to be the rating these bonds received?

Accepted Answer

A)  AA 
B)  A 
C)  BBB 
D)  BB 
E)  AAA 
A)  AA 
B)  A 
C)  BBB 
D)  BB 
E)  AAA

Question 8

Use the table for the question(s) below.
Consider the following yields to maturity on various one-year zero-coupon securities:
- 
The price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a AAA rating is closest to:

Accepted Answer

A)  94.70 
B)  95.60 
C)  94.16 
D)  95.42 
E)  95.10 
A)  94.70 
B)  95.60 
C)  94.16 
D)  95.42 
E)  95.10

Question 9

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 the appropriate YTM on the Sisyphean bond is 7.5%,then the price that this bond trades for will be closest to:

Accepted Answer

A)  $1045 
B)  $691 
C)  $1000 
D)  $957 
E)  $960 
A)  $1045 
B)  $691 
C)  $1000 
D)  $957 
E)  $960

Question 10

What is the yield to maturity of a one-year,risk-free,zero-coupon bond with a $10,000 face value and a price of $9600 when released?

Accepted Answer

A)  3.212% 
B)  4.000% 
C)  4.167% 
D)  9.600% 
E)  5.140% 
A)  3.212% 
B)  4.000% 
C)  4.167% 
D)  9.600% 
E)  5.140%

Question 11

How much will the coupon payments be of a 20-year $500 bond with a 8% coupon rate and quarterly payments?

Accepted Answer

A)  $3.33 
B)  $10.00 
C)  $20.00 
D)  $40.00 
E)  $2.00 
A)  $3.33 
B)  $10.00 
C)  $20.00 
D)  $40.00 
E)  $2.00

Question 12

How are investors in zero-coupon bonds compensated for making such an investment?

Accepted Answer

A)  Such bonds are purchased at their face value and sold at a premium at a later date. 
B)  The bond makes regular interest payments. 
C)  Such bonds are purchased at a discount to their face value. 
D)  The face value of these bonds is less than the value of the bond when the bond matures. 
E)  Bond prices always increase over time. 
A)  Such bonds are purchased at their face value and sold at a premium at a later date. 
B)  The bond makes regular interest payments. 
C)  Such bonds are purchased at a discount to their face value. 
D)  The face value of these bonds is less than the value of the bond when the bond matures. 
E)  Bond prices always increase over time.

Question 13

A bond has a $1000 face value,ten years to maturity,and 7% semi-annual coupon payments.What would be the expected difference in this bond's price immediately before and immediately after the next coupon payment?

Accepted Answer

A)  $18 
B)  $35 
C)  $70 
D)  $84 
E)  $100 
A)  $18 
B)  $35 
C)  $70 
D)  $84 
E)  $100

Question 14

Use the information for the question(s) below.
  
-Shown above is information from FINRA regarding one of Bank of America's bonds.How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid semi-annually?

Accepted Answer

A)  $1.49 
B)  $2.15 
C)  $2.32 
D)  $4.30 
E)  $2.18 
A)  $1.49 
B)  $2.15 
C)  $2.32 
D)  $4.30 
E)  $2.18

Question 15

A bond has three years to maturity,a $2000 face value,and a 6.3% coupon rate with annual coupons.What is its yield to maturity if it is currently trading at $1801?

Accepted Answer

A)  6.30% 
B)  8.48% 
C)  9.22% 
D)  10.32% 
E)  9.88% 
A)  6.30% 
B)  8.48% 
C)  9.22% 
D)  10.32% 
E)  9.88%

Question 16

What is the coupon rate of a 10-year $10,000 bond with semi-annual payments of $300?

Accepted Answer

A)  1% 
B)  10% 
C)  1.5% 
D)  3% 
E)  6% 
A)  1% 
B)  10% 
C)  1.5% 
D)  3% 
E)  6%

Question 17

Which of the following bonds will be most sensitive to a change in interest rates if all bonds have the same initial yield to maturity?

Accepted Answer

A)  a ten-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semi-annually 
B)  a ten-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semi-annually 
C)  a 20-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semi-annually 
D)  a 20-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semi-annually 
E)  a 15-year bond with a $1000 face value whose coupon rate is 6.6% APR paid semi-annually 
A)  a ten-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semi-annually 
B)  a ten-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semi-annually 
C)  a 20-year bond with a $1000 face value whose coupon rate is 5.8% APR paid semi-annually 
D)  a 20-year bond with a $1000 face value whose coupon rate is 7.4% APR paid semi-annually 
E)  a 15-year bond with a $1000 face value whose coupon rate is 6.6% APR paid semi-annually

Question 18

A company releases a five-year bond with a face value of $1000 and coupons paid semi-annually.If market interest rates imply a YTM of 6%,what should be the coupon rate offered if the bond is to trade at par?

Accepted Answer

A)  3% 
B)  4% 
C)  6% 
D)  8% 
E)  9% 
A)  3% 
B)  4% 
C)  6% 
D)  8% 
E)  9%

Question 19

Allan purchases a 10-year $100 coupon bond with 10% annual coupons.If its yield to maturity decreases from 7.5% to 6%,what is the percentage change in the price of the bond?

Accepted Answer

A)  -9.49% 
B)  10.48% 
C)  1.5% 
D)  9.49% 
E)  -10.48% 
A)  -9.49% 
B)  10.48% 
C)  1.5% 
D)  9.49% 
E)  -10.48%

Question 20

A risk-free,zero-coupon bond with a $5000 face value has ten years to maturity.The bond currently trades at $3650.What is the yield to maturity of this bond?

Accepted Answer

A)  3.197% 
B)  3.284% 
C)  3.465% 
D)  3.699% 
E)  3.747% 
A)  3.197% 
B)  3.284% 
C)  3.465% 
D)  3.699% 
E)  3.747%

Exam 6: Bonds

A $10,000 bond with a coupon rate of 5% paid semi-annually has five years to maturity and a yield to maturity of 3%.What is the price of this bond?

Under what situation can a zero-coupon bond be selling at a premium?

What is the coupon rate of a 10-year $4,000 bond with annual coupon payments of $100?

A coupon bond with a face value of $25,000 and quarterly coupon payments has five years to maturity and a yield to maturity of 5%.If the current price is $10,980,what is the coupon rate?

The only cash payment an investor in a zero-coupon bond receives is the face value of the bond on its maturity date.

Based on Figure 6.5, which of the following is least likely to default?

Use the table for the question(s) below. Consider the following yields to maturity on various one-year zero-coupon securities: - The price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a AAA rating is closest to:

What is the yield to maturity of a one-year,risk-free,zero-coupon bond with a $10,000 face value and a price of $9600 when released?

How much will the coupon payments be of a 20-year $500 bond with a 8% coupon rate and quarterly payments?

How are investors in zero-coupon bonds compensated for making such an investment?

A bond has a $1000 face value,ten years to maturity,and 7% semi-annual coupon payments.What would be the expected difference in this bond's price immediately before and immediately after the next coupon payment?

Use the information for the question(s) below. -Shown above is information from FINRA regarding one of Bank of America's bonds.How much would the holder of such a bond earn each coupon payment for each $100 in face value if coupons are paid semi-annually?

A bond has three years to maturity,a $2000 face value,and a 6.3% coupon rate with annual coupons.What is its yield to maturity if it is currently trading at $1801?

What is the coupon rate of a 10-year $10,000 bond with semi-annual payments of $300?

Which of the following bonds will be most sensitive to a change in interest rates if all bonds have the same initial yield to maturity?

A company releases a five-year bond with a face value of $1000 and coupons paid semi-annually.If market interest rates imply a YTM of 6%,what should be the coupon rate offered if the bond is to trade at par?

Allan purchases a 10-year $100 coupon bond with 10% annual coupons.If its yield to maturity decreases from 7.5% to 6%,what is the percentage change in the price of the bond?

A risk-free,zero-coupon bond with a $5000 face value has ten years to maturity.The bond currently trades at $3650.What is the yield to maturity of this bond?

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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