Question 1

Which one of the following statements concerning bond ratings is correct?

Accepted Answer

A) Investment grade bonds are rated BB or higher by Standard & Poor's. 
B) Bond ratings assess both interest rate risk and default risk. 
C) Split rated bonds are called crossover bonds. 
D) The highest rating issued by Moody's is AAA. 
E) A "fallen angel" is a term applied to all "junk" bonds. 
A) Investment grade bonds are rated BB or higher by Standard & Poor's. 
B) Bond ratings assess both interest rate risk and default risk. 
C) Split rated bonds are called crossover bonds. 
D) The highest rating issued by Moody's is AAA. 
E) A "fallen angel" is a term applied to all "junk" bonds.

Question 2

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Accepted Answer

A) risk-free rate 
B) realized rate 
C) nominal rate 
D) real rate 
E) current rate 
A) risk-free rate 
B) realized rate 
C) nominal rate 
D) real rate 
E) current rate

Question 3

Which of the following relationships apply to a par value bond?
I.coupon rate < yield-to-maturity
II.current yield = yield-to-maturity
III.market price = call price
IV.market price = face value

Accepted Answer

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

Question 4

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

Accepted Answer

A) 4.67 percent 
B) 4.78 percent 
C) 5.08 percent 
D) 5.33 percent 
E) 5.54 percent 
A) 4.67 percent 
B) 4.78 percent 
C) 5.08 percent 
D) 5.33 percent 
E) 5.54 percent

Question 5

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

Accepted Answer

A) zero coupon 
B) callable 
C) senior 
D) collateralized 
E) unsecured 
A) zero coupon 
B) callable 
C) senior 
D) collateralized 
E) unsecured

Question 6

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

Accepted Answer

A) 1.60 percent 
B) 2.37 percent 
C) 6.32 percent 
D) 6.49 percent 
E) 6.88 percent 
A) 1.60 percent 
B) 2.37 percent 
C) 6.32 percent 
D) 6.49 percent 
E) 6.88 percent

Question 7

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September.The bonds are investment grade and sell at par.The bonds are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus 0.50 percent.Which of the following correctly describe the features of this bond?
I.bond rating of B
II."make whole" call price
III.$1,000 face value
IV.offer price of $1,000

Accepted Answer

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

Question 8

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Accepted Answer

A) 5.60 percent 
B) 5.67 percent 
C) 4.05 percent 
D) 6.00 percent 
E) 6.21 percent 
A) 5.60 percent 
B) 5.67 percent 
C) 4.05 percent 
D) 6.00 percent 
E) 6.21 percent

Question 9

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Accepted Answer

A) 12.26 years 
B) 12.53 years 
C) 18.49 years 
D) 24.37 years 
E) 25.05 years 
A) 12.26 years 
B) 12.53 years 
C) 18.49 years 
D) 24.37 years 
E) 25.05 years

Which one of the following statements concerning bond ratings is correct?

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Which of the following relationships apply to a par value bond? I.coupon rate < yield-to-maturity II.current yield = yield-to-maturity III.market price = call price IV.market price = face value

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters

Exam 7: Interest Rates and Bond Valuation

Which one of the following statements concerning bond ratings is correct?

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Which of the following relationships apply to a par value bond? I.coupon rate < yield-to-maturity II.current yield = yield-to-maturity III.market price = call price IV.market price = face value

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Introduction to Corporate Finance

Financial Statements, Taxes, and Cash Flow

Working With Financial Statements

Long-Term Financial Planning and Growth

Introduction to Valuation: The Time Value of Money

Discounted Cash Flow Valuation

Stock Valuation

Net Present Value and Other Investment Criteria

Making Capital Investment Decisions

Project Analysis and Evaluation

Some Lessons From Capital Market History

Return, Risk, and the Security Market Line

Cost of Capital

Raising Capital

Financial Leverage and Capital Structure Policy

Dividends and Payout Policy

Short-Term Finance and Planning

Cash and Liquidity Management

Credit and Inventory Management

International Corporate Finance

Behavioral Finance: Implications for Financial Management

Enterprise Risk Management

Options and Corporate Finance

Option Valuation

Mergers and Acquisitions

Leasing

Filters