Question 1

The U.S.corporate bond market

Accepted Answer

A) provides end-of-day values for all privately and publicly issued bonds. 
B) is the largest securities market in the world based on trading volume. 
C) is based on bond dealers who trade in a face-to-face market. 
D) is more transparent than it was in the 1990s. 
E) provides daily price quotes through BDEX,the bond dealers exchange. 
A) provides end-of-day values for all privately and publicly issued bonds. 
B) is the largest securities market in the world based on trading volume. 
C) is based on bond dealers who trade in a face-to-face market. 
D) is more transparent than it was in the 1990s. 
E) provides daily price quotes through BDEX,the bond dealers exchange.

Question 2

You are purchasing a bond with a face value of $3,000 and a coupon rate of 5.45 percent.The bond pays interest semiannually and has a yield to maturity of 5.51 percent.The bond matures in 7.5 years and pays its next interest payment in 4 months.What amount of accrued interest must you pay to purchase this bond today?

Accepted Answer

A) $25.50 
B) $27.25 
C) $51.00 
D) $37.75 
E) $54.50 
A) $25.50 
B) $27.25 
C) $51.00 
D) $37.75 
E) $54.50

Question 3

Assume a bond yields a real rate of return of 3.6 percent during a time when inflation is 1.87 percent.What would the actual nominal rate of return be?

Accepted Answer

A) 5)61% 
B) 5)47% 
C) 5)49% 
D) 5)54% 
E) 5)57% 
A) 5)61% 
B) 5)47% 
C) 5)49% 
D) 5)54% 
E) 5)57%

Question 4

A year ago,Jasper Inc.sold 20-year bonds at par with a coupon rate of 4.5 percent and semiannual payments.The face value of each bond is $1,000 and the yield to maturity is now 5.6 percent.What is the current value of each bond?

Accepted Answer

A) $923.09 
B) $880.92 
C) $872.35 
D) $905.92 
E) $868.66 
A) $923.09 
B) $880.92 
C) $872.35 
D) $905.92 
E) $868.66

Question 5

Taylor Bros.bonds have a face value of $5,000,a current market price of $5,248.50,and a coupon rate of 5.3 percent,compounded semiannually.What is the current yield on these bonds?

Accepted Answer

A) 5)38% 
B) 5)05% 
C) 5)17% 
D) 5)30% 
E) 5)41% 
A) 5)38% 
B) 5)05% 
C) 5)17% 
D) 5)30% 
E) 5)41%

Question 6

Atlas bonds have a face value of $1,000,mature in 4 years,pay interest semiannually,and have a coupon rate of 4.5 percent.The next interest payment will be paid 2 months from today.What is the clean price of this bond if the market rate of return is 5.1 percent?

Accepted Answer

A) $656.57 
B) $978.54 
C) $971.08 
D) $663.01 
E) $993.55 
A) $656.57 
B) $978.54 
C) $971.08 
D) $663.01 
E) $993.55

Question 7

An increase in which one of these is most apt to decrease the nominal interest rate?

Accepted Answer

A) Liquidity 
B) Interest rate risk 
C) Default risk 
D) Expected future inflation 
E) The relevant tax rate 
A) Liquidity 
B) Interest rate risk 
C) Default risk 
D) Expected future inflation 
E) The relevant tax rate

Question 8

Gugenheim offers 12-year coupon bonds with semiannual payments.The yield to maturity is 6.23 percent,and the bonds sell at 101 percent of par.What is the coupon rate?

Accepted Answer

A) 3)09% 
B) 3)18% 
C) 3)31% 
D) 6)35% 
E) 6)61% 
A) 3)09% 
B) 3)18% 
C) 3)31% 
D) 6)35% 
E) 6)61%

Question 9

The increase you realize in buying power as a result of owning a bond is referred to as the ________ rate of return.

Accepted Answer

A) inflated 
B) market 
C) nominal 
D) real 
E) risk-free 
A) inflated 
B) market 
C) nominal 
D) real 
E) risk-free

Question 10

Debentures

Accepted Answer

A) are a claim on assets not otherwise pledged as security. 
B) represent a mortgage claim on real estate. 
C) are a form of subordinated equity. 
D) is another term for trust deeds. 
E) are best defined as bearer bonds. 
A) are a claim on assets not otherwise pledged as security. 
B) represent a mortgage claim on real estate. 
C) are a form of subordinated equity. 
D) is another term for trust deeds. 
E) are best defined as bearer bonds.

Question 11

Debt securities

Accepted Answer

A) increase a firm's cost of doing business. 
B) pay tax-deductible dividends. 
C) are treated the same as equity securities in a bankruptcy proceeding. 
D) represent a minority ownership interest in the issuer. 
E) are considered a liability only at the time payment is actually due. 
A) increase a firm's cost of doing business. 
B) pay tax-deductible dividends. 
C) are treated the same as equity securities in a bankruptcy proceeding. 
D) represent a minority ownership interest in the issuer. 
E) are considered a liability only at the time payment is actually due.

Question 12

A bond has a coupon rate of 6 percent and matures in 10 years.The next semiannual interest payment will be paid 1 month from now.Which one of the following do you know with certainty concerning this bond?

Accepted Answer

A) The bond sells at a discount. 
B) The bond sells at a premium. 
C) The dirty price is higher than the clean price. 
D) The clean price is higher than the dirty price. 
E) The market price exceeds the par value. 
A) The bond sells at a discount. 
B) The bond sells at a premium. 
C) The dirty price is higher than the clean price. 
D) The clean price is higher than the dirty price. 
E) The market price exceeds the par value.

Question 13

A deferred call provision is designed to

Accepted Answer

A) guarantee a bond will be repaid on a certain date prior to maturity. 
B) prohibit the calling of a bond prior to a certain date. 
C) ensure bond holders receive full value when a bond is called. 
D) ensure any bankruptcy of the issuer is deferred until a bond is repaid in full. 
E) ensure the owner of a bond agrees to the call before a bond is called. 
A) guarantee a bond will be repaid on a certain date prior to maturity. 
B) prohibit the calling of a bond prior to a certain date. 
C) ensure bond holders receive full value when a bond is called. 
D) ensure any bankruptcy of the issuer is deferred until a bond is repaid in full. 
E) ensure the owner of a bond agrees to the call before a bond is called.

Question 14

The lowest Moody's bond rating that is considered to be an investment-grade rating is

Accepted Answer

A) 
A)  
B) Baa. 
C) BBB. 
D) Ba. 
E) BB. 
A) 
A)  
B) Baa. 
C) BBB. 
D) Ba. 
E) BB.

Question 15

The overall level of interest rates is primarily affected by the

Accepted Answer

A) real rate. 
B) inflation rate. 
C) interest rate risk premium. 
D) liquidity premium. 
E) default risk premium. 
A) real rate. 
B) inflation rate. 
C) interest rate risk premium. 
D) liquidity premium. 
E) default risk premium.

Question 16

A bond that pays interest annually yields a rate of return of 8.74 percent.The inflation rate for the same period is 2.48 percent.What is the actual real rate of return on this bond?

Accepted Answer

A) 5)79% 
B) 5)87% 
C) 6)11% 
D) 6)04% 
E) 5)91% 
A) 5)79% 
B) 5)87% 
C) 6)11% 
D) 6)04% 
E) 5)91%

Question 17

A $1,000 Treasury bond matures in 13.5 years,pays interest semiannually,and carries a coupon rate of 3.53 percent.What is the price of this bond if the discount rate is 4 percent?

Accepted Answer

A) $991.17 
B) $951.34 
C) $949.38 
D) $976.96 
E) $997.08 
A) $991.17 
B) $951.34 
C) $949.38 
D) $976.96 
E) $997.08

Question 18

All else constant,a bond will sell at ________ when the yield to maturity is ________ the coupon rate.

Accepted Answer

A) par;less than 
B) a premium;equal to 
C) par;higher than 
D) a discount;higher than 
E) a premium;higher than 
A) par;less than 
B) a premium;equal to 
C) par;higher than 
D) a discount;higher than 
E) a premium;higher than

Question 19

______bonds pay interest that is taxed only at the federal level.

Accepted Answer

A) Municipal 
B) Corporate 
C) Treasury 
D) Mortgage 
E) Zero coupon 
A) Municipal 
B) Corporate 
C) Treasury 
D) Mortgage 
E) Zero coupon

Question 20

TJ Machine bonds have a coupon rate of 5.3 percent,a face value of $1,000,and pay interest semiannually.The bonds mature in 23 years and have a yield to maturity of 5.4 percent.What will be the percentage change in the bond's price if the market rate increases by 1 percent to 6.4 percent?

Accepted Answer

A) 13.32% 
B) 12.02% 
C) -11.96% 
D) -12.00% 
E) -13.13% 
A) 13.32% 
B) 12.02% 
C) -11.96% 
D) -12.00% 
E) -13.13%

The U.S.corporate bond market

Assume a bond yields a real rate of return of 3.6 percent during a time when inflation is 1.87 percent.What would the actual nominal rate of return be?

A year ago,Jasper Inc.sold 20-year bonds at par with a coupon rate of 4.5 percent and semiannual payments.The face value of each bond is $1,000 and the yield to maturity is now 5.6 percent.What is the current value of each bond?

Taylor Bros.bonds have a face value of $5,000,a current market price of $5,248.50,and a coupon rate of 5.3 percent,compounded semiannually.What is the current yield on these bonds?

Atlas bonds have a face value of $1,000,mature in 4 years,pay interest semiannually,and have a coupon rate of 4.5 percent.The next interest payment will be paid 2 months from today.What is the clean price of this bond if the market rate of return is 5.1 percent?

An increase in which one of these is most apt to decrease the nominal interest rate?

Gugenheim offers 12-year coupon bonds with semiannual payments.The yield to maturity is 6.23 percent,and the bonds sell at 101 percent of par.What is the coupon rate?

The increase you realize in buying power as a result of owning a bond is referred to as the ________ rate of return.

Debentures

Debt securities

A bond has a coupon rate of 6 percent and matures in 10 years.The next semiannual interest payment will be paid 1 month from now.Which one of the following do you know with certainty concerning this bond?

A deferred call provision is designed to

The lowest Moody's bond rating that is considered to be an investment-grade rating is

The overall level of interest rates is primarily affected by the

A bond that pays interest annually yields a rate of return of 8.74 percent.The inflation rate for the same period is 2.48 percent.What is the actual real rate of return on this bond?

A $1,000 Treasury bond matures in 13.5 years,pays interest semiannually,and carries a coupon rate of 3.53 percent.What is the price of this bond if the discount rate is 4 percent?

All else constant,a bond will sell at when the yield to maturity is the coupon rate.

______bonds pay interest that is taxed only at the federal level.

TJ Machine bonds have a coupon rate of 5.3 percent,a face value of $1,000,and pay interest semiannually.The bonds mature in 23 years and have a yield to maturity of 5.4 percent.What will be the percentage change in the bond's price if the market rate increases by 1 percent to 6.4 percent?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

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Exam 5: Interest Rates AMCQ Bomcq Valuation

The U.S.corporate bond market

Assume a bond yields a real rate of return of 3.6 percent during a time when inflation is 1.87 percent.What would the actual nominal rate of return be?

A year ago,Jasper Inc.sold 20-year bonds at par with a coupon rate of 4.5 percent and semiannual payments.The face value of each bond is $1,000 and the yield to maturity is now 5.6 percent.What is the current value of each bond?

Taylor Bros.bonds have a face value of $5,000,a current market price of $5,248.50,and a coupon rate of 5.3 percent,compounded semiannually.What is the current yield on these bonds?

Atlas bonds have a face value of $1,000,mature in 4 years,pay interest semiannually,and have a coupon rate of 4.5 percent.The next interest payment will be paid 2 months from today.What is the clean price of this bond if the market rate of return is 5.1 percent?

An increase in which one of these is most apt to decrease the nominal interest rate?

Gugenheim offers 12-year coupon bonds with semiannual payments.The yield to maturity is 6.23 percent,and the bonds sell at 101 percent of par.What is the coupon rate?

The increase you realize in buying power as a result of owning a bond is referred to as the ________ rate of return.

Debentures

Debt securities

A bond has a coupon rate of 6 percent and matures in 10 years.The next semiannual interest payment will be paid 1 month from now.Which one of the following do you know with certainty concerning this bond?

A deferred call provision is designed to

The lowest Moody's bond rating that is considered to be an investment-grade rating is

The overall level of interest rates is primarily affected by the

A bond that pays interest annually yields a rate of return of 8.74 percent.The inflation rate for the same period is 2.48 percent.What is the actual real rate of return on this bond?

A $1,000 Treasury bond matures in 13.5 years,pays interest semiannually,and carries a coupon rate of 3.53 percent.What is the price of this bond if the discount rate is 4 percent?

All else constant,a bond will sell at ________ when the yield to maturity is ________ the coupon rate.

______bonds pay interest that is taxed only at the federal level.

TJ Machine bonds have a coupon rate of 5.3 percent,a face value of $1,000,and pay interest semiannually.The bonds mature in 23 years and have a yield to maturity of 5.4 percent.What will be the percentage change in the bond's price if the market rate increases by 1 percent to 6.4 percent?

Introduction to Corporate Finance

Financial Statements AMCQ Cash Flow

Financial Statements Analysis Amcq Financial Models

Discounted Cash Flow Valuation

Stock Valuation

Net Present Value AMCQ Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, Real Options, AMCQ Capital Budgeting

Risk Amcq Return: Lessons From Market History

Return Amcq Risk: the Capital Asset Pricing Model Capm

Risk, cost of Capital, AMCQ Valuation

Efficient Capital Markets Amcq Behavioral Challenges

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Dividemcqs AMCQ Other Payouts

Options Amcq Corporate Finance

Short-Term Finance Amcq Planning

Raising Capital

International Corporate Finance

Mergers Amcq Acquisitions Web Only

Filters

All else constant,a bond will sell at when the yield to maturity is the coupon rate.