Question 1

How much does the $1,000 to be received upon a bond's maturity in four years add to the bond's price if the appropriate discount rate is 6 percent?

Accepted Answer

A) $209.91 
B) $260.00 
C) $760.00 
D) $792.09 
A) $209.91 
B) $260.00 
C) $760.00 
D) $792.09

Question 2

Which of the following is correct for a bond currently selling at a premium to par?

Accepted Answer

A) Its current yield is higher than its coupon rate 
B) Its current yield is lower than its coupon rate 
C) Its yield to maturity is higher than its coupon rate 
D) Its default risk is extremely low 
A) Its current yield is higher than its coupon rate 
B) Its current yield is lower than its coupon rate 
C) Its yield to maturity is higher than its coupon rate 
D) Its default risk is extremely low

Question 3

When riskier corporations issue bonds that include a default premium, the promised yield will sometimes be:

Accepted Answer

A) less than the actual yield 
B) greater than the actual yield 
C) less than the yield on a default-free bond 
D) greater than the face value of the bond 
A) less than the actual yield 
B) greater than the actual yield 
C) less than the yield on a default-free bond 
D) greater than the face value of the bond

Question 4

By how much will a bond increase in price over the next year if it currently sells for $925, has five years until maturity, and an annual coupon rate of 7%?

Accepted Answer

A) $8.26 
B) $8.92 
C) $12.55 
D) $15.00 Using the BAII Plus calculator: 
A) $8.26 
B) $8.92 
C) $12.55 
D) $15.00 Using the BAII Plus calculator:

Question 5

If a four-year bond with a 7 percent coupon and a 10 percent yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

Accepted Answer

A) $904.90 
B) $925.39 
C) $947.93 
D) $1,000.00 Using the BAII Plus Calculator: 
A) $904.90 
B) $925.39 
C) $947.93 
D) $1,000.00 Using the BAII Plus Calculator:

Question 6

How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 5 years if the interest rate is 7%?

Accepted Answer

A) $696.74 
B) $1,075.82 
C) $1,082.00 
D) $1,123.01 Using the BAII Plus calculator: 
A) $696.74 
B) $1,075.82 
C) $1,082.00 
D) $1,123.01 Using the BAII Plus calculator:

Question 7

If an investor purchases a bond when its current yield is less than the coupon rate, then the bond's price will be expected to:

Accepted Answer

A) Decline over time, reaching par value at maturity 
B) Increase over time, reaching par value at maturity 
C) Be less than the face value at maturity 
D) Exceed the face value at maturity 
A) Decline over time, reaching par value at maturity 
B) Increase over time, reaching par value at maturity 
C) Be less than the face value at maturity 
D) Exceed the face value at maturity

Question 8

If an investor purchases a 3 percent, two-year Canada real return bond and the CPI increases 3 percent over each of the next two years, what does the investor receive at maturity?

Accepted Answer

A) $1,000.00 
B) $1,030.00 
C) $1,060.90 
D) $1,092.73 
A) $1,000.00 
B) $1,030.00 
C) $1,060.90 
D) $1,092.73

Question 9

If a four year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

Accepted Answer

A) $904.90 
B) $925.39 
C) $947.93 
D) $1,000.00 Using the BAII Plus calculator: 
A) $904.90 
B) $925.39 
C) $947.93 
D) $1,000.00 Using the BAII Plus calculator:

Question 10

A bond's yield to maturity takes into consideration:

Accepted Answer

A) Current yield but not price changes of a bond 
B) Price changes but not current yield of a bond 
C) Both current yield and price changes of a bond 
D) Neither current yield nor price changes of a bond 
A) Current yield but not price changes of a bond 
B) Price changes but not current yield of a bond 
C) Both current yield and price changes of a bond 
D) Neither current yield nor price changes of a bond

How much does the $1,000 to be received upon a bond's maturity in four years add to the bond's price if the appropriate discount rate is 6 percent?

Which of the following is correct for a bond currently selling at a premium to par?

When riskier corporations issue bonds that include a default premium, the promised yield will sometimes be:

By how much will a bond increase in price over the next year if it currently sells for $925, has five years until maturity, and an annual coupon rate of 7%?

If a four-year bond with a 7 percent coupon and a 10 percent yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 5 years if the interest rate is 7%?

If an investor purchases a bond when its current yield is less than the coupon rate, then the bond's price will be expected to:

If an investor purchases a 3 percent, two-year Canada real return bond and the CPI increases 3 percent over each of the next two years, what does the investor receive at maturity?

If a four year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

A bond's yield to maturity takes into consideration:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters

Exam 6: Valuing Bonds

How much does the $1,000 to be received upon a bond's maturity in four years add to the bond's price if the appropriate discount rate is 6 percent?

Which of the following is correct for a bond currently selling at a premium to par?

When riskier corporations issue bonds that include a default premium, the promised yield will sometimes be:

By how much will a bond increase in price over the next year if it currently sells for $925, has five years until maturity, and an annual coupon rate of 7%?

If a four-year bond with a 7 percent coupon and a 10 percent yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

How much would an investor expect to pay for a $1,000 par value bond with a 9% annual coupon that matures in 5 years if the interest rate is 7%?

If an investor purchases a bond when its current yield is less than the coupon rate, then the bond's price will be expected to:

If an investor purchases a 3 percent, two-year Canada real return bond and the CPI increases 3 percent over each of the next two years, what does the investor receive at maturity?

If a four year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90, how much will it be worth one year from now if interest rates are constant?

A bond's yield to maturity takes into consideration:

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

Mergers, Acquisitions, and Corporate Control

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters