Exam 7: Interest Rates and Bond Valuation

A bond has a market price that exceeds its face value.Which of the following features currently apply to this bond? I.discounted price II.premium price III.yield-to-maturity that exceeds the coupon rate IV.yield-to-maturity that is less than the coupon rate

A Treasury bond is quoted at a price of 106: 23 with a 3.50 percent coupon.The bond pays interest semiannually.What is the current yield on one of these bonds?

You have won a contest and will receive $2,500 a year in real terms for the next 3 years.Each payment will be received at the end of the period with the first payment occurring one year from today.The relevant nominal discount rate is 6.3 percent and the inflation rate is 3.1 percent.What are your winnings worth today?

Which one of the following risk premiums compensates for the possibility of nonpayment by the bond issuer?

Green Roof Inns is preparing a bond offering with a 6 percent,semiannual coupon and a face value of $1,000.The bonds will be repaid in 10 years and will be sold at par.Given this,which one of the following statements is correct?

The pure time value of money is known as the:

A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030,plus any accrued interest.The additional $30 is called which one of the following?

The outstanding bonds of Winter Time Products provide a real rate of return of 5.6 percent.The current rate of inflation is 4.68 percent.What is the actual nominal rate of return on these bonds?

Grand Adventure Properties offers a 9.5 percent coupon bond with annual payments.The yield to maturity is 11.2 percent and the maturity date is 11 years from today.What is the market price of this bond if the face value is $1,000?

Dexter Mills issued 20-year bonds a year ago at a coupon rate of 10.2 percent.The bonds make semiannual payments.The yield-to-maturity on these bonds is 9.2 percent.What is the current bond price?

The Walthers Company has a semi-annual coupon bond outstanding.An increase in the market rate of interest will have which one of the following effects on this bond?

Define liquidity risk,default risk,and taxability risk and explain how these risks relate to bonds and bond yields.

A Treasury bond is quoted as 99: 18 asked and 99: 09 bid.What is the bid-ask spread in dollars on a $5,000 face value bond?

As a bond's time to maturity increases,the bond's sensitivity to interest rate risk:

Describe the relationships that exist between the coupon rate,the yield to maturity,and the current yield for both a discount bond and a premium bond.

Recently,you discovered a putable income bond that is convertible.If you purchase this bond,you will have the right to do which of the following? I.force the issuer to repurchase the bond prior to maturity II.choose when you wish to receive interest payments III.convert the bond into a TIPS IV.convert the bond into equity shares

A bond that pays interest annually yielded 7.47 percent last year.The inflation rate for the same period was 4 percent.What was the actual real rate of return on this bond for last year?

Northern Warehouses wants to raise $11.4 million to expand its business.To accomplish this,it plans to sell 40-year,$1,000 face value,zero-coupon bonds.The bonds will be priced to yield 8.75 percent.What is the minimum number of bonds it must sell to raise the $11.4 million it needs?

A U.S.Treasury bond that is quoted at 100: 11 is selling:

Today,June 15,you want to buy a bond with a quoted price of 98.64.The bond pays interest on January 1 and July 1.Which one of the following prices represents your total cost of purchasing this bond today?