Question 1

It would be realistic to read an asked price listed as 100:16 and a bid price of 100:18.

Accepted Answer

A) True 
 B)False

Question 2

By how much did the price of a $1,000 par-value bond increase if The Wall Street Journal shows a change of +6 from the previous day?

Accepted Answer

A)  $0.600 
B)  $1.875 
C)  $6.000 
D)  $18.75 
A)  $0.600 
B)  $1.875 
C)  $6.000 
D)  $18.75

Question 3

Bonds selling at a premium price offer a higher current yield (which overstates the true return)than bonds selling at par value.

Accepted Answer

A) True 
 B)False

Question 4

Bonds with a rating of Ba or below by Moody's are referred to as speculative grade,high-yield,or junk bonds.

Accepted Answer

A) True 
 B)False

Question 5

How much does the $1,000 to be received upon a bond's maturity in 4 years add to the bond's price if the appropriate discount rate is 6%?

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 6

Describe the process for calculating a yield to maturity for a bond,and tell what could cause the yield to maturity to change.

Accepted Answer

The yield to maturity for a bond is calc

Question 7

Two years ago bonds were issued with 10 years until maturity,selling at par,and a 7% coupon.If interest rates for that grade of bond are currently 8.25%,what will be the market price of these bonds?

Accepted Answer

A)  $917.06 
B)  $928.84 
C)  $987.50 
D)  $1,000.00 
A)  $917.06 
B)  $928.84 
C)  $987.50 
D)  $1,000.00

Question 8

Where does a "convertible bond" get its name?

Accepted Answer

A)  The option of converting into shares of common stock 
B)  The option of increasing its coupon payments when interest rates increase 
C)  The option of converting from zero-coupon to coupon-paying bond 
D)  The option of increasing yield without decreasing price 
A)  The option of converting into shares of common stock 
B)  The option of increasing its coupon payments when interest rates increase 
C)  The option of converting from zero-coupon to coupon-paying bond 
D)  The option of increasing yield without decreasing price

Question 9

What are catastrophe (or Cat)bonds?

Accepted Answer

Managers of insurance companies constant

Question 10

What is the yield to maturity for a bond paying $100 annually that has 6 years until maturity and sells for $1,000?

Accepted Answer

A)  6.0% 
B)  8.5% 
C)  10.0% 
D)  12.5% 
A)  6.0% 
B)  8.5% 
C)  10.0% 
D)  12.5%

Question 11

When an investor purchases a $1,000 par value bond that was quoted at 97.16,the investor:

Accepted Answer

A)  receives 97.5% of the stated coupon payments. 
B)  receives $975 upon the maturity date of the bond. 
C)  pays 97.5% of face value for the bond. 
D)  pays $1,025 for the bond. 
A)  receives 97.5% of the stated coupon payments. 
B)  receives $975 upon the maturity date of the bond. 
C)  pays 97.5% of face value for the bond. 
D)  pays $1,025 for the bond.

Question 12

Which of the following is likely to be correct for a CCC-rated bond,compared to a BBB-rated bond?

Accepted Answer

A)  The CCC bond will sell for a higher price. 
B)  The CCC bond will sell for a lower price. 
C)  The CCC bond will offer a higher promised yield to maturity. 
D)  The CCC bond will offer a lower promised yield to maturity. 
A)  The CCC bond will sell for a higher price. 
B)  The CCC bond will sell for a lower price. 
C)  The CCC bond will offer a higher promised yield to maturity. 
D)  The CCC bond will offer a lower promised yield to maturity.

Question 13

Capital losses will automatically be the case for bond investors who buy:

Accepted Answer

A)  discount bonds. 
B)  premium bonds. 
C)  zero-coupon bonds. 
D)  junk bonds. 
A)  discount bonds. 
B)  premium bonds. 
C)  zero-coupon bonds. 
D)  junk bonds.

Question 14

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 15

The purpose of a floating-rate bond is to:

Accepted Answer

A)  save interest expense for corporate issuers. 
B)  avoid making interest payments until maturity. 
C)  shift the yield curve. 
D)  offer rates adjusted to current market conditions. 
A)  save interest expense for corporate issuers. 
B)  avoid making interest payments until maturity. 
C)  shift the yield curve. 
D)  offer rates adjusted to current market conditions.

Question 16

A bond's payment at the maturity is referred to as its face value.

Accepted Answer

A) True 
 B)False

Question 17

When the yield curve is upward-sloping,then:

Accepted Answer

A)  short-maturity bonds offer high coupon rates. 
B)  long-maturity bonds are priced above par value. 
C)  short-maturity bonds yield less than long-maturity bonds. 
D)  long-maturity bonds increase in price when interest rates increase. 
A)  short-maturity bonds offer high coupon rates. 
B)  long-maturity bonds are priced above par value. 
C)  short-maturity bonds yield less than long-maturity bonds. 
D)  long-maturity bonds increase in price when interest rates increase.

Question 18

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 
A)  $696.74 
B)  $1,075.82 
C)  $1,082.00 
D)  $1,123.01

Question 19

What price will be paid for a U.S.Treasury bond with an ask price of 135:20?

Accepted Answer

A)  $1,350.20 
B)  $1,350.31 
C)  $1,350.63 
D)  $1,356.25 
A)  $1,350.20 
B)  $1,350.31 
C)  $1,350.63 
D)  $1,356.25

Question 20

Why are long-term bonds more sensitive to changes in interest rates than short-term bonds?

Accepted Answer

A long-term bond is more sensitive to ch

Exam 6: Valuing Bonds

It would be realistic to read an asked price listed as 100:16 and a bid price of 100:18.

By how much did the price of a $1,000 par-value bond increase if The Wall Street Journal shows a change of +6 from the previous day?

Bonds selling at a premium price offer a higher current yield (which overstates the true return)than bonds selling at par value.

Bonds with a rating of Ba or below by Moody's are referred to as speculative grade,high-yield,or junk bonds.

How much does the $1,000 to be received upon a bond's maturity in 4 years add to the bond's price if the appropriate discount rate is 6%?

Describe the process for calculating a yield to maturity for a bond,and tell what could cause the yield to maturity to change.

Two years ago bonds were issued with 10 years until maturity,selling at par,and a 7% coupon.If interest rates for that grade of bond are currently 8.25%,what will be the market price of these bonds?

Where does a "convertible bond" get its name?

What are catastrophe (or Cat)bonds?

What is the yield to maturity for a bond paying $100 annually that has 6 years until maturity and sells for $1,000?

When an investor purchases a $1,000 par value bond that was quoted at 97.16,the investor:

Which of the following is likely to be correct for a CCC-rated bond,compared to a BBB-rated bond?

Capital losses will automatically be the case for bond investors who buy:

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

The purpose of a floating-rate bond is to:

A bond's payment at the maturity is referred to as its face value.

When the yield curve is upward-sloping,then:

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%?

What price will be paid for a U.S.Treasury bond with an ask price of 135:20?

Why are long-term bonds more sensitive to changes in interest rates than short-term bonds?

Goals and Governance of the Corporation

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

How Corporations Raise Venture Capital and Issue Securities

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Risk, Return, and Capital Budgeting

Mergers, Acquisitions, and Corporate Control

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