Question 1

A bond has a Macaulay duration of 6.25 years.What will be the percentage change in the bond price if the yield to maturity increases from 6 percent to 6.4 percent?

Accepted Answer

A)  -2.23 percent 
B)  -2.43 percent 
C)  -3.30 percent 
D)  -3.38 percent 
E)  -3.46 percent 
A)  -2.23 percent 
B)  -2.43 percent 
C)  -3.30 percent 
D)  -3.38 percent 
E)  -3.46 percent

Question 2

The yield to maturity is the:

Accepted Answer

A)  discount rate that equates a bond's price with the present value of the bond's future cash flows. 
B)  rate you will earn if your bond is called on the earliest possible date. 
C)  rate computed by dividing the annual interest by the par value. 
D)  rate used to compute the amount of each interest payment. 
E)  rate computed as the annual interest divided by the market value. 
A)  discount rate that equates a bond's price with the present value of the bond's future cash flows. 
B)  rate you will earn if your bond is called on the earliest possible date. 
C)  rate computed by dividing the annual interest by the par value. 
D)  rate used to compute the amount of each interest payment. 
E)  rate computed as the annual interest divided by the market value.

Question 3

The modified duration:

Accepted Answer

A)  is equal to the Macaulay duration divided by (1 + Yield to maturity). 
B)  multiplied by (-1 × Change in the yield to maturity) equals the approximate percentage change in a bond's price. 
C)  will be the same for any bonds that have equal times to maturity. 
D)  only applies to pure discount securities. 
E)  must be converted to a Macaulay duration before computing the percentage change in a bond's price. 
A)  is equal to the Macaulay duration divided by (1 + Yield to maturity). 
B)  multiplied by (-1 × Change in the yield to maturity) equals the approximate percentage change in a bond's price. 
C)  will be the same for any bonds that have equal times to maturity. 
D)  only applies to pure discount securities. 
E)  must be converted to a Macaulay duration before computing the percentage change in a bond's price.

Question 4

Jefferson-Smith bonds are quoted at a price of $952.42 for a $1,000 face value bond.These bonds have a modified duration of 9.84.What is the dollar value of an 01?

Accepted Answer

A)  $0.0977 
B)  $0.0963 
C)  $0.1028 
D)  $0.9372 
E)  $0.9767 
A)  $0.0977 
B)  $0.0963 
C)  $0.1028 
D)  $0.9372 
E)  $0.9767

Question 5

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates?
I.low coupon rates
II.high coupon rates
III.short time to maturity
IV.long time to maturity

Accepted Answer

A)  III only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only 
A)  III only 
B)  I and III only 
C)  I and IV only 
D)  II and III only 
E)  II and IV only

Question 6

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32nd?

Accepted Answer

A)  0.4008 
B)  0.4178 
C)  0.4229 
D)  0.4347 
E)  0.4401 
A)  0.4008 
B)  0.4178 
C)  0.4229 
D)  0.4347 
E)  0.4401

Question 7

A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent.What is the current market price?

Accepted Answer

A)  $975.18 
B)  $989.18 
C)  $1,011.82 
D)  $3,933.43 
E)  $4,067.47 
A)  $975.18 
B)  $989.18 
C)  $1,011.82 
D)  $3,933.43 
E)  $4,067.47

Question 8

You own a 5.5 percent,semiannual coupon bond that matures in 8 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Accepted Answer

A)  -3.05 percent 
B)  -3.10 percent 
C)  -3.25 percent 
D)  -3.30 percent 
E)  -3.45 percent 
A)  -3.05 percent 
B)  -3.10 percent 
C)  -3.25 percent 
D)  -3.30 percent 
E)  -3.45 percent

Question 9

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

Accepted Answer

A)  reinvestment rate risk 
B)  current rate risk 
C)  payment risk 
D)  current yield risk 
E)  maturity risk 
A)  reinvestment rate risk 
B)  current rate risk 
C)  payment risk 
D)  current yield risk 
E)  maturity risk

Question 10

A bond pays semiannual interest payments of $35.25.What is the coupon rate if the par value is $1,000?

Accepted Answer

A)  5.75 percent 
B)  6.50 percent 
C)  7.05 percent 
D)  8.50 percent 
E)  9.38 percent 
A)  5.75 percent 
B)  6.50 percent 
C)  7.05 percent 
D)  8.50 percent 
E)  9.38 percent

Question 11

A bond has a modified duration of 7.22 and a yield to maturity of 8.1 percent.If interest rates increase by 75 basis points,the bond's price will decrease by ________ percent.

Accepted Answer

A)  -0.46 
B)  -0.54 
C)  -4.60 
D)  -5.42 
E)  -6.18 
A)  -0.46 
B)  -0.54 
C)  -4.60 
D)  -5.42 
E)  -6.18

Question 12

A $1,000 par value bond is currently valued at $1,055.The bond pays interest semi-annually,has 10 years to maturity,and has a yield to maturity of 7.3 percent.The coupon rate is ________ percent and the current yield is ________ percent.

Accepted Answer

A)  7.80; 6.21 
B)  8.00; 7.31 
C)  8.00; 7.51 
D)  8.08; 7.66 
E)  8.50; 8.30 
A)  7.80; 6.21 
B)  8.00; 7.31 
C)  8.00; 7.51 
D)  8.08; 7.66 
E)  8.50; 8.30

Question 13

A bond has 8 years to maturity,a 7 percent coupon,a $1,000 face value,and pays interest semiannually.What is the bond's current price if the yield to maturity is 6.91 percent?

Accepted Answer

A)  $799.32 
B)  $848.16 
C)  $917.92 
D)  $1,005.46 
E)  $1,009.73 
A)  $799.32 
B)  $848.16 
C)  $917.92 
D)  $1,005.46 
E)  $1,009.73

Question 14

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Accepted Answer

A)  change in yield to call due to passage of one year 
B)  change in yield to maturity of one percent 
C)  change in yield to maturity of one basis point 
D)  change in coupon rate of one percent 
E)  change in coupon rate of one basis point 
A)  change in yield to call due to passage of one year 
B)  change in yield to maturity of one percent 
C)  change in yield to maturity of one basis point 
D)  change in coupon rate of one percent 
E)  change in coupon rate of one basis point

Question 15

Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields?

Accepted Answer

A)  coupon payment 
B)  time to maturity 
C)  market price 
D)  duration 
E)  current yield 
A)  coupon payment 
B)  time to maturity 
C)  market price 
D)  duration 
E)  current yield

Question 16

Two bonds have a coupon rate of 5.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 6.1 percent.Bond S matures in 5 years and bond L matures in 10 years.What is the difference in the current prices of these bonds?

Accepted Answer

A)  $25.26 
B)  $26.78 
C)  $27.40 
D)  $28.38 
E)  $29.02 
A)  $25.26 
B)  $26.78 
C)  $27.40 
D)  $28.38 
E)  $29.02

Question 17

What is the annual interest divided by the market price of a bond called?

Accepted Answer

A)  coupon rate 
B)  effective annual yield 
C)  current yield 
D)  yield to maturity 
E)  yield to market 
A)  coupon rate 
B)  effective annual yield 
C)  current yield 
D)  yield to maturity 
E)  yield to market

Question 18

Will owns a bond with a make-whole call provision.The bond matures in 13 years but is being called today.The coupon rate is 8.25 percent with interest paid semiannually.What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies?

Accepted Answer

A)  $932.84 
B)  $957.11 
C)  $1,040.51 
D)  $1,110.28 
E)  $1,128.66 
A)  $932.84 
B)  $957.11 
C)  $1,040.51 
D)  $1,110.28 
E)  $1,128.66

Question 19

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

Accepted Answer

A)  -7.08 
B)  -5.67 
C)  1.45 
D)  5.72 
E)  7.08 
A)  -7.08 
B)  -5.67 
C)  1.45 
D)  5.72 
E)  7.08

Question 20

A $1,000 face value bond matures in 11 years,pays interest semiannually,and has a 6.5 percent coupon.The bond currently sells for $1,025.What is the yield to maturity?

Accepted Answer

A)  6.17 percent 
B)  6.18 percent 
C)  6.28 percent 
D)  6.34 percent 
E)  6.37 percent 
A)  6.17 percent 
B)  6.18 percent 
C)  6.28 percent 
D)  6.34 percent 
E)  6.37 percent

A bond has a Macaulay duration of 6.25 years.What will be the percentage change in the bond price if the yield to maturity increases from 6 percent to 6.4 percent?

The yield to maturity is the:

The modified duration:

Jefferson-Smith bonds are quoted at a price of $952.42 for a $1,000 face value bond.These bonds have a modified duration of 9.84.What is the dollar value of an 01?

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates? I.low coupon rates II.high coupon rates III.short time to maturity IV.long time to maturity

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32^nd?

A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent.What is the current market price?

You own a 5.5 percent,semiannual coupon bond that matures in 8 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

A bond pays semiannual interest payments of $35.25.What is the coupon rate if the par value is $1,000?

A bond has a modified duration of 7.22 and a yield to maturity of 8.1 percent.If interest rates increase by 75 basis points,the bond's price will decrease by ________ percent.

A $1,000 par value bond is currently valued at $1,055.The bond pays interest semi-annually,has 10 years to maturity,and has a yield to maturity of 7.3 percent.The coupon rate is percent and the current yield is percent.

A bond has 8 years to maturity,a 7 percent coupon,a $1,000 face value,and pays interest semiannually.What is the bond's current price if the yield to maturity is 6.91 percent?

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields?

Two bonds have a coupon rate of 5.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 6.1 percent.Bond S matures in 5 years and bond L matures in 10 years.What is the difference in the current prices of these bonds?

What is the annual interest divided by the market price of a bond called?

Will owns a bond with a make-whole call provision.The bond matures in 13 years but is being called today.The coupon rate is 8.25 percent with interest paid semiannually.What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies?

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

A $1,000 face value bond matures in 11 years,pays interest semiannually,and has a 6.5 percent coupon.The bond currently sells for $1,025.What is the yield to maturity?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

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Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

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Exam 10: Bond Prices and Yields

A bond has a Macaulay duration of 6.25 years.What will be the percentage change in the bond price if the yield to maturity increases from 6 percent to 6.4 percent?

The yield to maturity is the:

The modified duration:

Jefferson-Smith bonds are quoted at a price of $952.42 for a $1,000 face value bond.These bonds have a modified duration of 9.84.What is the dollar value of an 01?

Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates? I.low coupon rates II.high coupon rates III.short time to maturity IV.long time to maturity

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32nd?

A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent.What is the current market price?

You own a 5.5 percent,semiannual coupon bond that matures in 8 years.The par value is $1,000 and the current yield to maturity is 6.4 percent.What will the percentage change in the price of your bond be if the yield to maturity suddenly increases by 50 basis points?

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

A bond pays semiannual interest payments of $35.25.What is the coupon rate if the par value is $1,000?

A bond has a modified duration of 7.22 and a yield to maturity of 8.1 percent.If interest rates increase by 75 basis points,the bond's price will decrease by ________ percent.

A $1,000 par value bond is currently valued at $1,055.The bond pays interest semi-annually,has 10 years to maturity,and has a yield to maturity of 7.3 percent.The coupon rate is ________ percent and the current yield is ________ percent.

A bond has 8 years to maturity,a 7 percent coupon,a $1,000 face value,and pays interest semiannually.What is the bond's current price if the yield to maturity is 6.91 percent?

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields?

Two bonds have a coupon rate of 5.25 percent,semi-annual payments,face values of $1,000,and yields to maturity of 6.1 percent.Bond S matures in 5 years and bond L matures in 10 years.What is the difference in the current prices of these bonds?

What is the annual interest divided by the market price of a bond called?

Will owns a bond with a make-whole call provision.The bond matures in 13 years but is being called today.The coupon rate is 8.25 percent with interest paid semiannually.What is the current call price if the applicable discount rate is 7.75 percent and the make-whole call provision applies?

The outstanding bonds of Alpha Extracts have a yield to maturity of 7.4 percent and a modified duration of 11.8.If the yield to maturity instantly decreased to 6.8 percent,the bond's price would increase/decrease by ________ percent.

A $1,000 face value bond matures in 11 years,pays interest semiannually,and has a 6.5 percent coupon.The bond currently sells for $1,025.What is the yield to maturity?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

A bond has a dollar value of an 01 of 0.0710.What is the yield value of a 32^nd?

A $1,000 par value bond is currently valued at $1,055.The bond pays interest semi-annually,has 10 years to maturity,and has a yield to maturity of 7.3 percent.The coupon rate is percent and the current yield is percent.