Exam 6: Bonds

A $10,000 bond with a coupon rate of 3.1% paid semi-annually has 10 years to maturity and a yield to maturity of 4.8%.If interest rates rise and the yield to maturity increases to 5.8%,what will happen to the price of the bond?

Which of the following best describes a bond rated by Standard and Poor's ,Moody's,and DBRS as B?

What must be the price of a $10,000 bond with a 6.5% coupon rate,semi-annual coupons,and two years to maturity if it has a yield to maturity of 8% APR?

Which of the following bonds will be least sensitive to a change in interest rates?

Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex. The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments). The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Assuming that Luther's bonds receive a AA rating,the number of bonds that Luther must issue to raise the needed $25 million is closest to:

Bond traders generally quote bond yields rather than bond prices,since yield to maturity depends on the face value of the bond.

Use the figure for the question(s) below. -The current zero-coupon yield curve for risk-free bonds is shown above.What is the risk-free interest rate on a 3-year maturity?

Before it matures,the price of any bond is always less than its face value.

The above table shows the price per $100 face value of several risk-free,zero-coupon bonds.What is the yield to maturity of the three-year,zero-coupon,risk-free bond shown?

A company issues a ten-year $1000 bond at par with a coupon rate of 6% paid semi-annually.The YTM at the beginning of the third year of the bond (8 years left to maturity)is 7.8%.What is the new price of the bond?

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. -Why do bond traders typically quote bond yields rather than bond prices?

Use the table for the question(s) below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): -The yield to maturity for the three-year zero-coupon bond is closest to:

A corporate bond makes payments of $9.67 every month for ten years with a final payment of $2009.67.Which of the following best describes this bond?

A $1000 bond with a coupon rate of 5.4% paid semi-annually has five years to maturity and a yield to maturity of 7.5%.If interest rates rise and the yield to maturity increases to 7.8%,what will happen to the price of the bond?

Which of the following best illustrates why a bond is a type of loan?

A ten-year,zero-coupon bond with a yield to maturity of 6% has a face value of $1000.An investor purchases the bond when it is initially traded,and then sells it four years later.What is the internal rate of return (IRR)of this investment,assuming the yield to maturity does not change?

Which of the following statements is true?

A risk-free,zero-coupon bond has 15 years to maturity.Which of the following is closest to the price per $100 of face value that the bond will trade at if the YTM is 7%?

Use the information for the question(s) below. -The above table shows the yields to maturity on a number of one-year,zero-coupon securities.What is the credit spread on a one-year,zero-coupon corporate bond with a B rating?

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. -What care,if any,should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?