Question 1

What are mortality bonds?

Accepted Answer

Bond issuers are always trying to invent

Question 2

If the coupon rate is lower than current interest rates,then the yield to maturity will be:

Accepted Answer

A)  lower than current interest rates. 
B)  equal to the coupon rate. 
C)  higher than the coupon rate. 
D)  lower than the coupon rate. 
A)  lower than current interest rates. 
B)  equal to the coupon rate. 
C)  higher than the coupon rate. 
D)  lower than the coupon rate.

Question 3

How much should you be prepared to pay for a 10-year bond with a 6% coupon and a yield to maturity of 7.5%?

Accepted Answer

A)  $411.84 
B)  $897.04 
C)  $985.00 
D)  $1,000.00 
A)  $411.84 
B)  $897.04 
C)  $985.00 
D)  $1,000.00

Question 4

Which of the following is correct for a bond priced at $1,100 that has 10 years remaining until maturity,and a 10% coupon,with semiannual payments?

Accepted Answer

A)  Each payment of interest equals $50. 
B)  Each payment of interest equals $55. 
C)  Each payment of interest equals $100. 
D)  Each payment of interest equals $110. 
A)  Each payment of interest equals $50. 
B)  Each payment of interest equals $55. 
C)  Each payment of interest equals $100. 
D)  Each payment of interest equals $110.

Question 5

If a bond offers an investor 11% in nominal return during a year in which the rate of inflation was 4%,then the investor's real return was:

Accepted Answer

A)  6.73% 
B)  7.00% 
C)  8.75% 
D)  10.56% 
A)  6.73% 
B)  7.00% 
C)  8.75% 
D)  10.56%

Question 6

Why do investors pay attention to bond ratings and demand a higher interest rate for bonds with low ratings?

Accepted Answer

Investors demand higher promised yields

Question 7

One-year Treasury bonds yield 5% while 2-year bonds yield 6%.You are quite confident that in 1 year's time 1-year bonds will yield 8%.Would the higher yield on 2-year bonds cause you to prefer them?

Accepted Answer

If you invest in a 2-year bond,you will

Question 8

Which of the following bonds would be likely to exhibit a greater degree of interest rate risk?

Accepted Answer

A)  A zero-coupon bond with 20 years until maturity 
B)  A coupon-paying bond with 20 years until maturity 
C)  A floating-rate bond with 20 years until maturity 
D)  A zero-coupon bond with 30 years until maturity 
A)  A zero-coupon bond with 20 years until maturity 
B)  A coupon-paying bond with 20 years until maturity 
C)  A floating-rate bond with 20 years until maturity 
D)  A zero-coupon bond with 30 years until maturity

Question 9

By how much did the price of a $1,000 par-value bond decrease if The Wall Street Journal shows a change of -12 from the previous day?

Accepted Answer

A)  $0.88 
B)  $1.20 
C)  $3.75 
D)  $12.00 
A)  $0.88 
B)  $1.20 
C)  $3.75 
D)  $12.00

Question 10

Zero-coupon bonds are issued at prices below face value,and the investor's return comes from the difference between the purchase price and the payment of face value at maturity.

Accepted Answer

A) True 
 B)False

Question 11

A long-term investor would more likely be interested in current yield than internal rate of return.

Accepted Answer

A) True 
 B)False

Question 12

U.S.Treasury bond yields do not contain a:

Accepted Answer

A)  coupon interest payment. 
B)  nominal interest rate. 
C)  default premium. 
D)  yield to maturity. 
A)  coupon interest payment. 
B)  nominal interest rate. 
C)  default premium. 
D)  yield to maturity.

Question 13

A bond's par value can also be called its:

Accepted Answer

A)  coupon payment. 
B)  present value. 
C)  default value. 
D)  face value 
A)  coupon payment. 
B)  present value. 
C)  default value. 
D)  face value

Question 14

What is the coupon rate for a bond with 3 years until maturity,a price of $1,053.46,and a yield to maturity of 6%?

Accepted Answer

A)  6% 
B)  8% 
C)  10% 
D)  11% 
A)  6% 
B)  8% 
C)  10% 
D)  11%

Question 15

What are the differences between the bond's coupon rate,current yield,and yield to maturity?

Accepted Answer

A bond is a long-term debt of a governme

Question 16

If you purchase a 5-year,zero-coupon bond for $500,how much could it be sold for 3 years later if interest rates have remained stable?

Accepted Answer

A)  $650.00 
B)  $723.05 
C)  $757.86 
D)  $800.00 
A)  $650.00 
B)  $723.05 
C)  $757.86 
D)  $800.00

Question 17

How can one find the market price of a bond given its yield to maturity and find a bond's yield given its price? Why do prices and yields vary inversely?

Accepted Answer

Bonds are valued by discounting the coup

Question 18

A bond with 10 years until maturity,an 8% coupon,and an 8% yield to maturity increased in price to $1,107.83 yesterday.What apparently happened to interest rates?

Accepted Answer

A)  Rates increased by 2.0%. 
B)  Rates decreased by 2.0%. 
C)  Rates increased by .72%. 
D)  Rates decreased by 1.5%. 
A)  Rates increased by 2.0%. 
B)  Rates decreased by 2.0%. 
C)  Rates increased by .72%. 
D)  Rates decreased by 1.5%.

Question 19

Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%?

Accepted Answer

A)  The face value of the bond has decreased. 
B)  The bond's maturity value exceeds the bond's price. 
C)  The bond's internal rate of return is 7%. 
D)  The bond's maturity value is lower than the bond's price. 
A)  The face value of the bond has decreased. 
B)  The bond's maturity value exceeds the bond's price. 
C)  The bond's internal rate of return is 7%. 
D)  The bond's maturity value is lower than the bond's price.

Question 20

If a bond is priced at par value,then:

Accepted Answer

A)  it has a very low level of default risk. 
B)  its coupon rate equals its yield to maturity. 
C)  it must be a zero-coupon bond. 
D)  the bond is quite close to maturity. 
A)  it has a very low level of default risk. 
B)  its coupon rate equals its yield to maturity. 
C)  it must be a zero-coupon bond. 
D)  the bond is quite close to maturity.

Exam 6: Valuing Bonds

What are mortality bonds?

If the coupon rate is lower than current interest rates,then the yield to maturity will be:

How much should you be prepared to pay for a 10-year bond with a 6% coupon and a yield to maturity of 7.5%?

Which of the following is correct for a bond priced at $1,100 that has 10 years remaining until maturity,and a 10% coupon,with semiannual payments?

If a bond offers an investor 11% in nominal return during a year in which the rate of inflation was 4%,then the investor's real return was:

Why do investors pay attention to bond ratings and demand a higher interest rate for bonds with low ratings?

One-year Treasury bonds yield 5% while 2-year bonds yield 6%.You are quite confident that in 1 year's time 1-year bonds will yield 8%.Would the higher yield on 2-year bonds cause you to prefer them?

Which of the following bonds would be likely to exhibit a greater degree of interest rate risk?

By how much did the price of a $1,000 par-value bond decrease if The Wall Street Journal shows a change of -12 from the previous day?

Zero-coupon bonds are issued at prices below face value,and the investor's return comes from the difference between the purchase price and the payment of face value at maturity.

A long-term investor would more likely be interested in current yield than internal rate of return.

U.S.Treasury bond yields do not contain a:

A bond's par value can also be called its:

What is the coupon rate for a bond with 3 years until maturity,a price of $1,053.46,and a yield to maturity of 6%?

What are the differences between the bond's coupon rate,current yield,and yield to maturity?

If you purchase a 5-year,zero-coupon bond for $500,how much could it be sold for 3 years later if interest rates have remained stable?

How can one find the market price of a bond given its yield to maturity and find a bond's yield given its price? Why do prices and yields vary inversely?

A bond with 10 years until maturity,an 8% coupon,and an 8% yield to maturity increased in price to $1,107.83 yesterday.What apparently happened to interest rates?

Which of the following statements is correct for a 10% coupon bond that has a current yield of 7%?

If a bond is priced at par value,then:

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

International Financial Management

Options

Risk Management

Filters