Question 1

The Wall Street Journal bond quotes indicate that the net close for a bond with a $1,000 par value is   .The closing price for that bond was $100.75.

Accepted Answer

A) True 
 B)False

Question 2

If a bond sells for its par value,the coupon interest rate and yield to maturity are equal.

Accepted Answer

A) True 
 B)False

Question 3

A bond will sell at a discount (below par value)if

Accepted Answer

A)  the market value of the bond is less than the present value of the discount rate of the bond. 
B)  current market interest rates are moving in the same direction as bond values. 
C)  investor's current required rate of return is above the coupon rate of the bond. 
D)  the economy is booming. 
A)  the market value of the bond is less than the present value of the discount rate of the bond. 
B)  current market interest rates are moving in the same direction as bond values. 
C)  investor's current required rate of return is above the coupon rate of the bond. 
D)  the economy is booming.

Question 4

In an efficient securities market,the market value of a security is equal to

Accepted Answer

A)  its liquidation value. 
B)  its book value. 
C)  its intrinsic value. 
D)  par value. 
A)  its liquidation value. 
B)  its book value. 
C)  its intrinsic value. 
D)  par value.

Question 5

If a bond's rating declines,the interest rate demanded by investors,called the required return,also decreases.

Accepted Answer

A) True 
 B)False

Question 6

If you are willing to pay $1,077 for a 15-year $1,000 par value bond that pays 9 percent interest semiannually,what is your expected rate of return?

Accepted Answer

Yield to M

Question 7

A bond that matures in 5 years has less interest rate risk than a bond that matures in 25 years because regardless of changes in interest rates,the bond can be redeemed for face value 20 years earlier.

Accepted Answer

A) True 
 B)False

Question 8

What is the expected rate of return on a bond that matures in 5 years,has a par value of $1,000,a coupon rate of 11.5%,and is currently selling for $982? Assume annual coupon payments.

Accepted Answer

A)  12.5% 
B)  12.0% 
C)  12.7% 
D)  13.4% 
A)  12.5% 
B)  12.0% 
C)  12.7% 
D)  13.4%

Question 9

Calculate the value of a bond that is expected to mature in 18 years with a $1,000 face value.The coupon rate is 4%,and the required rate of return is 8%.Interest is paid annually.

Accepted Answer

The answer of Calculate the value of a bond that...

Question 10

William Corp.bonds have a current yield of 7% and mature in 10 years.Smith Corp.bonds have a current yield of 5% and mature in 10 years.Given this information,which of the following statements is MOST correct?

Accepted Answer

A)  William Corp. bonds will have a higher yield to maturity than Smith Corp. bonds. 
B)  Smith Corp. bonds will sell for a lower price than William Corp. bonds. 
C)  Smith Corp. bonds are riskier than William Corp. bonds. 
D)  If both bonds have the same yield to maturity, then the price of Smith Corp. bonds must be less than the price of William Corp. bonds. 
A)  William Corp. bonds will have a higher yield to maturity than Smith Corp. bonds. 
B)  Smith Corp. bonds will sell for a lower price than William Corp. bonds. 
C)  Smith Corp. bonds are riskier than William Corp. bonds. 
D)  If both bonds have the same yield to maturity, then the price of Smith Corp. bonds must be less than the price of William Corp. bonds.

Question 11

What is the yield to maturity of a corporate bond with 13 years to maturity,a coupon rate of 8% per year,a $1,000 par value,and a current market price of $1,250? Assume semiannual coupon payments.

Accepted Answer

A)  4.2% 
B)  4.7% 
C)  6.0% 
D)  5.3% 
A)  4.2% 
B)  4.7% 
C)  6.0% 
D)  5.3%

Question 12

Which of the following statements is true?

Accepted Answer

A)  The value of a bond is inversely related to changes in investors' present required rate of return. 
B)  If interest rates decrease, the value of a bond will decrease. 
C)  If interest rates increase, the value of a bond will increase. 
D)  If interest rates remain constant, the value of premium bonds will increase over time. 
A)  The value of a bond is inversely related to changes in investors' present required rate of return. 
B)  If interest rates decrease, the value of a bond will decrease. 
C)  If interest rates increase, the value of a bond will increase. 
D)  If interest rates remain constant, the value of premium bonds will increase over time.

Question 13

Speculative,or non-investment-grade,bonds have an S&P bond rating of

Accepted Answer

A)  C or less. 
B)  CCC or less. 
C)  BB or less. 
D)  BBB or less. 
A)  C or less. 
B)  CCC or less. 
C)  BB or less. 
D)  BBB or less.

Question 14

Junk bonds are also called high-yield bonds.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true of a zero coupon bond?

Accepted Answer

A)  The bond makes no coupon payments. 
B)  The bond sells at a premium prior to maturity. 
C)  The bond has a zero par value. 
D)  The bond has no value until the year it matures because there are no positive cash flows until then. 
A)  The bond makes no coupon payments. 
B)  The bond sells at a premium prior to maturity. 
C)  The bond has a zero par value. 
D)  The bond has no value until the year it matures because there are no positive cash flows until then.

Question 16

Which of the following affect an asset's value to an investor?
I.Amount of an asset's expected cash flow
II.The riskiness of the cash flows
III.Timing of an asset's cash flows
IV.Investor's required rate of return

Accepted Answer

A)  I, II, III 
B)  I, III, IV 
C)  I, II, IV 
D)  I, II, III, IV 
A)  I, II, III 
B)  I, III, IV 
C)  I, II, IV 
D)  I, II, III, IV

Question 17

If markets were entirely efficient (perfect),which of the following would we conclude?

Accepted Answer

A)  There would be no inflation. 
B)  Book value would be the same as market value. 
C)  No firms would ever default on their bonds. 
D)  Market value and intrinsic value would be the same. 
A)  There would be no inflation. 
B)  Book value would be the same as market value. 
C)  No firms would ever default on their bonds. 
D)  Market value and intrinsic value would be the same.

Question 18

Explain the different types of value.

Accepted Answer

The term value is often used in differen

Question 19

A company with a bond rating of BBB is more likely to have which of the following qualities compared to a company with a bond rating of B?

Accepted Answer

A)  greater reliance on equity financing 
B)  high variability in past earnings 
C)  little use of subordinated debt 
D)  small firm size 
A)  greater reliance on equity financing 
B)  high variability in past earnings 
C)  little use of subordinated debt 
D)  small firm size

Question 20

Bond prices are inversely related to market interest rates.

Accepted Answer

A) True 
 B)False

The Wall Street Journal bond quotes indicate that the net close for a bond with a $1,000 par value is .The closing price for that bond was $100.75.

If a bond sells for its par value,the coupon interest rate and yield to maturity are equal.

A bond will sell at a discount (below par value)if

In an efficient securities market,the market value of a security is equal to

If a bond's rating declines,the interest rate demanded by investors,called the required return,also decreases.

If you are willing to pay $1,077 for a 15-year $1,000 par value bond that pays 9 percent interest semiannually,what is your expected rate of return?

A bond that matures in 5 years has less interest rate risk than a bond that matures in 25 years because regardless of changes in interest rates,the bond can be redeemed for face value 20 years earlier.

What is the expected rate of return on a bond that matures in 5 years,has a par value of $1,000,a coupon rate of 11.5%,and is currently selling for $982? Assume annual coupon payments.

Calculate the value of a bond that is expected to mature in 18 years with a $1,000 face value.The coupon rate is 4%,and the required rate of return is 8%.Interest is paid annually.

William Corp.bonds have a current yield of 7% and mature in 10 years.Smith Corp.bonds have a current yield of 5% and mature in 10 years.Given this information,which of the following statements is MOST correct?

What is the yield to maturity of a corporate bond with 13 years to maturity,a coupon rate of 8% per year,a $1,000 par value,and a current market price of $1,250? Assume semiannual coupon payments.

Which of the following statements is true?

Speculative,or non-investment-grade,bonds have an S&P bond rating of

Junk bonds are also called high-yield bonds.

Which of the following is true of a zero coupon bond?

Which of the following affect an asset's value to an investor? I.Amount of an asset's expected cash flow II.The riskiness of the cash flows III.Timing of an asset's cash flows IV.Investor's required rate of return

If markets were entirely efficient (perfect),which of the following would we conclude?

Explain the different types of value.

A company with a bond rating of BBB is more likely to have which of the following qualities compared to a company with a bond rating of B?

Bond prices are inversely related to market interest rates.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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Exam 7: The Valuation and Characteristics of Bonds

The Wall Street Journal bond quotes indicate that the net close for a bond with a $1,000 par value is .The closing price for that bond was $100.75.

If a bond sells for its par value,the coupon interest rate and yield to maturity are equal.

A bond will sell at a discount (below par value)if

In an efficient securities market,the market value of a security is equal to

If a bond's rating declines,the interest rate demanded by investors,called the required return,also decreases.

If you are willing to pay $1,077 for a 15-year $1,000 par value bond that pays 9 percent interest semiannually,what is your expected rate of return?

A bond that matures in 5 years has less interest rate risk than a bond that matures in 25 years because regardless of changes in interest rates,the bond can be redeemed for face value 20 years earlier.

What is the expected rate of return on a bond that matures in 5 years,has a par value of $1,000,a coupon rate of 11.5%,and is currently selling for $982? Assume annual coupon payments.

Calculate the value of a bond that is expected to mature in 18 years with a $1,000 face value.The coupon rate is 4%,and the required rate of return is 8%.Interest is paid annually.

William Corp.bonds have a current yield of 7% and mature in 10 years.Smith Corp.bonds have a current yield of 5% and mature in 10 years.Given this information,which of the following statements is MOST correct?

What is the yield to maturity of a corporate bond with 13 years to maturity,a coupon rate of 8% per year,a $1,000 par value,and a current market price of $1,250? Assume semiannual coupon payments.

Which of the following statements is true?

Speculative,or non-investment-grade,bonds have an S&P bond rating of

Junk bonds are also called high-yield bonds.

Which of the following is true of a zero coupon bond?

Which of the following affect an asset's value to an investor? I.Amount of an asset's expected cash flow II.The riskiness of the cash flows III.Timing of an asset's cash flows IV.Investor's required rate of return

If markets were entirely efficient (perfect),which of the following would we conclude?

Explain the different types of value.

A company with a bond rating of BBB is more likely to have which of the following qualities compared to a company with a bond rating of B?

Bond prices are inversely related to market interest rates.

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

Filters