Question 1

Discuss the taxation ramifications of zero-coupon bonds.How has this taxation procedure changed over the years
 How has this change affected the demand for these bonds

Accepted Answer

The only return on a zero-coupon bond is

Question 2

A credit default swap is

Accepted Answer

A) a fancy term for a low-risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) None of the options 
A) a fancy term for a low-risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) None of the options

Question 3

A coupon bond that pays interest semi-annually is selling at par value of $1,000, matures in seven years and has a coupon rate of 8.6%.The yield to maturity on this bond is

Accepted Answer

A) 8.0%. 
B) 8.6%. 
C) 9.0%. 
D) 10.0%. 
E) None of the options 
A) 8.0%. 
B) 8.6%. 
C) 9.0%. 
D) 10.0%. 
E) None of the options

Question 4

A coupon bond is a bond that

Accepted Answer

A) pays interest on a regular basis (typically every six months). 
B) does not pay interest on a regular basis, but pays a lump sum at maturity. 
C) can always be converted into a specific number of shares of common stock in the issuing company. 
D) always sells at par. 
E) None of the options 
A) pays interest on a regular basis (typically every six months). 
B) does not pay interest on a regular basis, but pays a lump sum at maturity. 
C) can always be converted into a specific number of shares of common stock in the issuing company. 
D) always sells at par. 
E) None of the options

Question 5

A Treasury bond quoted at 107:16 107:18 has a bid price of _______ and an asked price of _____.

Accepted Answer

A) $107.16, $107.18 
B) $1,071.60, $1,071.80 
C) $1,075.00, $1,075.63 
D) $1,071.80, $1,071.60 
E) $1,070.50, $1,070.56 
A) $107.16, $107.18 
B) $1,071.60, $1,071.80 
C) $1,075.00, $1,075.63 
D) $1,071.80, $1,071.60 
E) $1,070.50, $1,070.56

Question 6

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in five years, and has a yield to maturity of 10%.The intrinsic value of the bond today will be __________ if the coupon rate is 8%.

Accepted Answer

A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,077.20 
E) None of the options 
A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,077.20 
E) None of the options

Question 7

A coupon bond pays interest semi-annually, matures in five years, has a par value of $1,000 and a coupon rate of 12%, and an effective annual yield to maturity of 10.25%.The price the bond should sell for today is

Accepted Answer

A) $922.77. 
B) $924.16. 
C) $1,075.80. 
D) $1,077.20. 
E) None of the options 
A) $922.77. 
B) $924.16. 
C) $1,075.80. 
D) $1,077.20. 
E) None of the options

Question 8

You purchased an annual interest coupon bond one year ago that now has six years remaining until maturity.The coupon rate of interest was 10% and par value was $1,000.At the time you purchased the bond, the yield to maturity was 8%.The amount you paid for this bond one year ago was

Accepted Answer

A) $1,057.50. 
B) $1,075.50. 
C) $1,088.50. 
D) $1.092.46. 
E) $1,104.13. 
A) $1,057.50. 
B) $1,075.50. 
C) $1,088.50. 
D) $1.092.46. 
E) $1,104.13.

Question 9

The invoice price of a bond that a buyer would pay is equal to

Accepted Answer

A) the asked price plus accrued interest. 
B) the asked price less accrued interest. 
C) the bid price plus accrued interest. 
D) the bid price less accrued interest. 
E) the bid price. 
A) the asked price plus accrued interest. 
B) the asked price less accrued interest. 
C) the bid price plus accrued interest. 
D) the bid price less accrued interest. 
E) the bid price.

Question 10

Consider two bonds, F and G.Both bonds presently are selling at their par value of $1,000.Each pays interest of $90 annually.Bond F will mature in 15 years while bond G will mature in 26 years.If the yields to maturity on the two bonds change from 9% to 10%,

Accepted Answer

A) both bonds will increase in value, but bond F will increase more than bond G. 
B) both bonds will increase in value, but bond G will increase more than bond F. 
C) both bonds will decrease in value, but bond F will decrease more than bond G. 
D) both bonds will decrease in value, but bond G will decrease more than bond F. 
E) None of the options 
A) both bonds will increase in value, but bond F will increase more than bond G. 
B) both bonds will increase in value, but bond G will increase more than bond F. 
C) both bonds will decrease in value, but bond F will decrease more than bond G. 
D) both bonds will decrease in value, but bond G will decrease more than bond F. 
E) None of the options

Question 11

Convertible bonds

Accepted Answer

A) give their holders the ability to share in price appreciation of the underlying stock. 
B) offer lower coupon rates than similar nonconvertible bonds. 
C) offer higher coupon rates than similar nonconvertible bonds. 
D) give their holders the ability to share in price appreciation of the underlying stock and offer lower coupon rates than similar nonconvertible bonds. 
E) give their holders the ability to share in price appreciation of the underlying stock and offer higher coupon rates than similar nonconvertible bonds. 
A) give their holders the ability to share in price appreciation of the underlying stock. 
B) offer lower coupon rates than similar nonconvertible bonds. 
C) offer higher coupon rates than similar nonconvertible bonds. 
D) give their holders the ability to share in price appreciation of the underlying stock and offer lower coupon rates than similar nonconvertible bonds. 
E) give their holders the ability to share in price appreciation of the underlying stock and offer higher coupon rates than similar nonconvertible bonds.

Question 12

You purchased an annual interest coupon bond one year ago that had nine years remaining to maturity at that time.The coupon interest rate was 10% and the par value was $1,000.At the time you purchased the bond, the yield to maturity was 8%.If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been

Accepted Answer

A) 8.00%. 
B) 7.82%. 
C) 7.00%. 
D) 11.95%. 
E) None of the options 
A) 8.00%. 
B) 7.82%. 
C) 7.00%. 
D) 11.95%. 
E) None of the options

Question 13

A Treasury bond due in one year has a yield of 4.3%; a Treasury bond due in five years has a yield of 5.06%.A bond issued by Boeing due in five years has a yield of 7.63%; a bond issued by Caterpillar due in one year has a yield of 7.16%.The default risk premiums on the bonds issued by Boeing and Caterpillar, respectively, are

Accepted Answer

A) 3.33% and 2.10%. 
B) 2.57% and 2.86%. 
C) 1.2% and 1.0%. 
D) 0.76% and 0.47%. 
E) None of the options 
A) 3.33% and 2.10%. 
B) 2.57% and 2.86%. 
C) 1.2% and 1.0%. 
D) 0.76% and 0.47%. 
E) None of the options

Question 14

If a 6.75% coupon bond is trading for $1,016.00, it has a current yield of

Accepted Answer

A) 7.38%. 
B) 6.64%. 
C) 7.25%. 
D) 8.53%. 
E) 7.18%. 
A) 7.38%. 
B) 6.64%. 
C) 7.25%. 
D) 8.53%. 
E) 7.18%.

Question 15

Why are many bonds callable
 What is the disadvantage to the investor of a callable bond
 What does the investor receive in exchange for a bond being callable
 How are bond valuation calculations affected if bonds are callable

Accepted Answer

Many bonds are callable to give the issu

Question 16

Consider the following $1,000 par value zero-coupon bonds:   The yield to maturity on bond D is

Accepted Answer

A) 10%. 
B) 11%. 
C) 12%. 
D) 14%. 
E) None of the options 
A) 10%. 
B) 11%. 
C) 12%. 
D) 14%. 
E) None of the options

Question 17

Using semi-annual compounding, a 15-year zero-coupon bond that has a par value of $1,000, and a required return of 8% would be priced at approximately

Accepted Answer

A) $308. 
B) $315. 
C) $464. 
D) $555. 
E) None of the options 
A) $308. 
B) $315. 
C) $464. 
D) $555. 
E) None of the options

Question 18

A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%.The current yield on this bond is

Accepted Answer

A) 10.39%. 
B) 10.43%. 
C) 10.58%. 
D) 11.73%. 
E) None of the options 
A) 10.39%. 
B) 10.43%. 
C) 10.58%. 
D) 11.73%. 
E) None of the options

Question 19

A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%.The intrinsic value of the bond today will be ______ if the coupon rate is 7.5%.

Accepted Answer

A) $712.99 
B) $851.93 
C) $1,123.01 
D) $886.28 
E) $1,000.00 
A) $712.99 
B) $851.93 
C) $1,123.01 
D) $886.28 
E) $1,000.00

Question 20

If you are buying a coupon bond between interest paying dates, is the amount you would pay to your broker for the bond more or less than the amount quoted in the financial quotation pages
 Discuss the differences and how these differences arise.

Accepted Answer

If you are buying a bond between interes

Exam 14: Bond Prices and Yields

Discuss the taxation ramifications of zero-coupon bonds.How has this taxation procedure changed over the years How has this change affected the demand for these bonds

A credit default swap is

A coupon bond that pays interest semi-annually is selling at par value of $1,000, matures in seven years and has a coupon rate of 8.6%.The yield to maturity on this bond is

A coupon bond is a bond that

A Treasury bond quoted at 107:16 107:18 has a bid price of _______ and an asked price of _____.

A coupon bond that pays interest semi-annually has a par value of $1,000, matures in five years, and has a yield to maturity of 10%.The intrinsic value of the bond today will be __________ if the coupon rate is 8%.

A coupon bond pays interest semi-annually, matures in five years, has a par value of $1,000 and a coupon rate of 12%, and an effective annual yield to maturity of 10.25%.The price the bond should sell for today is

You purchased an annual interest coupon bond one year ago that now has six years remaining until maturity.The coupon rate of interest was 10% and par value was $1,000.At the time you purchased the bond, the yield to maturity was 8%.The amount you paid for this bond one year ago was

The invoice price of a bond that a buyer would pay is equal to

Consider two bonds, F and G.Both bonds presently are selling at their par value of $1,000.Each pays interest of $90 annually.Bond F will mature in 15 years while bond G will mature in 26 years.If the yields to maturity on the two bonds change from 9% to 10%,

Convertible bonds

If a 6.75% coupon bond is trading for $1,016.00, it has a current yield of

Why are many bonds callable What is the disadvantage to the investor of a callable bond What does the investor receive in exchange for a bond being callable How are bond valuation calculations affected if bonds are callable

Consider the following $1,000 par value zero-coupon bonds: The yield to maturity on bond D is

Using semi-annual compounding, a 15-year zero-coupon bond that has a par value of $1,000, and a required return of 8% would be priced at approximately

A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%.The current yield on this bond is

A coupon bond that pays interest annually has a par value of $1,000, matures in six years, and has a yield to maturity of 11%.The intrinsic value of the bond today will be ______ if the coupon rate is 7.5%.

If you are buying a coupon bond between interest paying dates, is the amount you would pay to your broker for the bond more or less than the amount quoted in the financial quotation pages Discuss the differences and how these differences arise.

The Investment Environment

Asset Classes and Financial Instruments

How Securities Are Traded

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

The Term Structure of Interest Rates

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, Swaps, and Risk Management

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the Cfa Institute

Filters

A Treasury bond quoted at 107:16 107:18 has a bid price of ___ and an asked price of _.