Exam 7: Interest Rates and Bond Valuation

Inflation has remained low for the past three years but you have come to the conclusion that trend is ending and inflation will increase significantly over the next 18 months.Assume you have reached this conclusion prior to other investors reaching the same conclusion.What adjustments should you make to your bond portfolio in light of your conclusions?

Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually.The face value is $1,000 and the current market price is $1,062.50 per bond.The bonds mature in 16 years.What is the yield to maturity?

A 10-year,4.5 percent,semiannual coupon bond issued by Tyler Rentals has a $1,000 face value.The bond is currently quoted at 98.7.What is the clean price of this bond if the next interest payment will occur 2 months from today?

Currently,the bond market requires a return of 11.6 percent on the 10-year bonds issued by Winston Industries.The 11.6 percent is referred to as which one of the following?

Getty Markets has bonds outstanding that pay a 5 percent semiannual coupon,have a 5.28 percent yield to maturity,and a face value of $1,000.The current rate of inflation is 4.1 percent.What is the real rate of return on these bonds?

The interest rate risk premium is the:

Which one of the following statements is correct?

Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $832.The yield to maturity is 16.28 percent and the face value is $1,000.Interest is paid semiannually.How many years is it until these bonds mature?

The difference between the price that a dealer is willing to pay and the price at which he or she will sell is called the:

Bryceton,Inc.has bonds on the market with 13 years to maturity,a yield-to-maturity of 9.2 percent,and a current price of $802.30.The bonds make semiannual payments.What is the coupon rate?

A bond that is payable to whomever has physical possession of the bond is said to be in:

Which one of the following bonds is the least sensitive to interest rate risk?

Which one of the following relationships is stated correctly?

The break-even tax rate between a taxable corporate bond yielding 7 percent and a comparable nontaxable municipal bond yielding 5 percent can be expressed as:

Callable bonds generally:

Which of the following correctly describe U.S.Treasury bonds? I.have a "tick" size of 1/32 II.highly liquid III.quoted in dollars and cents IV.quoted at the dirty price

"Cat" bonds are primarily designed to help:

The bonds issued by Stainless Tubs bear an 8 percent coupon,payable semiannually.The bonds mature in 11 years and have a $1,000 face value.Currently,the bonds sell for $952.What is the yield to maturity?

You want to have $1.04 million in real dollars in an account when you retire in 38 years.The nominal return on your investment is 8 percent and the inflation rate is 3.5 percent.What is the real amount you must deposit each year to achieve your goal?

Bonner Metals wants to issue new 18-year bonds for some much-needed expansion projects.The company currently has 11 percent bonds on the market that sell for $1,459.51,make semiannual payments,and mature in 18 years.What should the coupon rate be on the new bonds if the firm wants to sell them at par?