Question 1

Which one of the following increases the probability that a bond will be called?

Accepted Answer

A) The call premium is relatively high. 
B) The bond is within the call protection period. 
C) The bond was issued within the past year. 
D) Market interest rates decline. 
E) The bond is selling at par. 
A) The call premium is relatively high. 
B) The bond is within the call protection period. 
C) The bond was issued within the past year. 
D) Market interest rates decline. 
E) The bond is selling at par.

Question 2

A bond has a current yield that is equal to the yield-to-maturity.Given this,which one of the following must also be true?

Accepted Answer

A) The bond must pay annual interest. 
B) The maturity value must be greater than the bond price. 
C) The bond can have any maturity date. 
D) The coupon rate must exceed the current yield. 
E) The price must exceed the par value. 
A) The bond must pay annual interest. 
B) The maturity value must be greater than the bond price. 
C) The bond can have any maturity date. 
D) The coupon rate must exceed the current yield. 
E) The price must exceed the par value.

Question 3

Last year,BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest payments.What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?

Accepted Answer

A) $1,003.97 
B) $1,006.53 
C) $1,042.89 
D) $1,414.14 
E) $1,585.36 
A) $1,003.97 
B) $1,006.53 
C) $1,042.89 
D) $1,414.14 
E) $1,585.36

Question 4

A $1,000 semiannual coupon bond matures in 15 years,has a coupon rate of 7.5 percent,and a market price of $982.What is the yield to maturity?

Accepted Answer

A) 3.86 percent 
B) 4.01 percent 
C) 4.08 percent 
D) 7.53 percent 
E) 7.70 percent 
A) 3.86 percent 
B) 4.01 percent 
C) 4.08 percent 
D) 7.53 percent 
E) 7.70 percent

Question 5

For a premium bond,the:

Accepted Answer

A) current yield is equal to the coupon rate but less than the yield to maturity. 
B) yield to maturity exceeds both the coupon rate and the current yield. 
C) coupon rate is equal to the yield to maturity but less than the current yield. 
D) current yield is less than either the coupon rate or the yield to maturity. 
E) coupon rate exceeds both the yield to maturity and the current yield. 
A) current yield is equal to the coupon rate but less than the yield to maturity. 
B) yield to maturity exceeds both the coupon rate and the current yield. 
C) coupon rate is equal to the yield to maturity but less than the current yield. 
D) current yield is less than either the coupon rate or the yield to maturity. 
E) coupon rate exceeds both the yield to maturity and the current yield.

Question 6

Identify and briefly explain four of Malkiel's five theorems.

Accepted Answer

Burton Malkiel is a well-known economist

Question 7

Which one of the following statements is correct concerning Macaulay duration?

Accepted Answer

A) The duration of a zero coupon bond is equal to the time to maturity. 
B) Most bonds have durations in excess of 15 years. 
C) The duration of a coupon bond is a linear function between the time to maturity and the duration. 
D) The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates. 
E) The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (-1 × Macaulay duration). 
A) The duration of a zero coupon bond is equal to the time to maturity. 
B) Most bonds have durations in excess of 15 years. 
C) The duration of a coupon bond is a linear function between the time to maturity and the duration. 
D) The duration of a coupon bond is greater than that of a zero coupon bond given equal maturity dates. 
E) The percentage change in a bond's price is approximately equal to the change in the yield to maturity multiplied by (-1 × Macaulay duration).

Question 8

A bond pays interest semiannually on February 1 and August 1.Assume today is October 1.How many months of accrued interest are included in the clean price of this bond?

Accepted Answer

A) zero 
B) two 
C) three 
D) four 
E) five 
A) zero 
B) two 
C) three 
D) four 
E) five

Question 9

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest.The par value is $1,000 per bond and the market value is $990.The coupon rate is _____ percent,the current yield is _____ percent,and the yield to maturity is _____ percent.

Accepted Answer

A) 6.90; 6.57; 6.67 
B) 6.90; 6.73; 6.71 
C) 6.90; 6.97; 7.02 
D) 7.00; 7.37; 7.07 
E) 7.00; 7.67; 7.21 
A) 6.90; 6.57; 6.67 
B) 6.90; 6.73; 6.71 
C) 6.90; 6.97; 7.02 
D) 7.00; 7.37; 7.07 
E) 7.00; 7.67; 7.21

Question 10

A premium bond is defined as a bond that:

Accepted Answer

A) has a duration that is less than 1.0. 
B) has a face value that exceeds its market value. 
C) is callable at a price which exceeds the face value. 
D) has a market price that exceeds par value. 
E) is selling for less than face value. 
A) has a duration that is less than 1.0. 
B) has a face value that exceeds its market value. 
C) is callable at a price which exceeds the face value. 
D) has a market price that exceeds par value. 
E) is selling for less than face value.

Question 11

The yield value of a 32nd is the change needed in which one of the following to cause a bond's price to change by 1/32nd?

Accepted Answer

A) current yield 
B) yield to maturity 
C) coupon rate 
D) call premium 
E) call date 
A) current yield 
B) yield to maturity 
C) coupon rate 
D) call premium 
E) call date

Question 12

A bond has a $1,000 par value,semiannual interest payments of $40,and a current market value of $1,054.The bonds mature in 12.5 years.The coupon rate is _____ percent,the current yield is _____ percent,and the yield to maturity is _____ percent.

Accepted Answer

A) 8.00; 7.67; 7.72 
B) 8.00; 7.72; 7.64 
C) 8.00; 7.59; 7.33 
D) 8.50; 7.87; 7.73 
E) 8.50; 8.12; 8.19 
A) 8.00; 7.67; 7.72 
B) 8.00; 7.72; 7.64 
C) 8.00; 7.59; 7.33 
D) 8.50; 7.87; 7.73 
E) 8.50; 8.12; 8.19

Question 13

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Accepted Answer

A) change in yield to call due to passage of one year 
B) change in yield to maturity of one percent 
C) change in yield to maturity of one basis point 
D) change in coupon rate of one percent 
E) change in coupon rate of one basis point 
A) change in yield to call due to passage of one year 
B) change in yield to maturity of one percent 
C) change in yield to maturity of one basis point 
D) change in coupon rate of one percent 
E) change in coupon rate of one basis point

Question 14

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

Accepted Answer

A) reinvestment rate risk 
B) current rate risk 
C) payment risk 
D) current yield risk 
E) maturity risk 
A) reinvestment rate risk 
B) current rate risk 
C) payment risk 
D) current yield risk 
E) maturity risk

Question 15

A bond has a dollar value of an 01 of .0684.What is the yield value of a 32nd?

Accepted Answer

A) .4408 
B) .4569 
C) .4629 
D) .4847 
E) .5084 
A) .4408 
B) .4569 
C) .4629 
D) .4847 
E) .5084

Question 16

Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default.Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

Accepted Answer

A) The bond will most likely be called while the bonds are selling at a discount. 
B) The yield-to-maturity is presently more relevant to an investor than the yield-to-call. 
C) The bond is likely going to be called due to the low current interest rates. 
D) The bond is currently paying a premium. 
E) The bond issue will most likely be replaced with a new bond issue. 
A) The bond will most likely be called while the bonds are selling at a discount. 
B) The yield-to-maturity is presently more relevant to an investor than the yield-to-call. 
C) The bond is likely going to be called due to the low current interest rates. 
D) The bond is currently paying a premium. 
E) The bond issue will most likely be replaced with a new bond issue.

Question 17

A bond has a par value of $1,000,a market price of $1,012,and a coupon rate of 5.75 percent.What is the current yield?

Accepted Answer

A) 5.68 percent 
B) 5.71 percent 
C) 5.75 percent 
D) 5.78 percent 
E) 5.80 percent 
A) 5.68 percent 
B) 5.71 percent 
C) 5.75 percent 
D) 5.78 percent 
E) 5.80 percent

Question 18

Which one of the following statements is correct according to Malkiel's Theorems?

Accepted Answer

A) For a given change in a bond's yield to maturity, the shorter the term to maturity, the greater will be the magnitude of the change in the bond's price. 
B) The price of an outstanding bond is unaffected by changes in market interest rates. 
C) The size of the change in a bond's price increases at a constant rate given even incremental increases in a bond's yield-to-maturity even as the term to maturity lengthens. 
D) For a given change in a bond's yield-to-maturity, the absolute magnitude of the resulting change in the bond's price is directly related to the bond's coupon rate. 
E) For a given absolute change in a bond's yield-to-maturity, a decrease in yield will cause a greater change in the bond's price than will an increase in yield. 
A) For a given change in a bond's yield to maturity, the shorter the term to maturity, the greater will be the magnitude of the change in the bond's price. 
B) The price of an outstanding bond is unaffected by changes in market interest rates. 
C) The size of the change in a bond's price increases at a constant rate given even incremental increases in a bond's yield-to-maturity even as the term to maturity lengthens. 
D) For a given change in a bond's yield-to-maturity, the absolute magnitude of the resulting change in the bond's price is directly related to the bond's coupon rate. 
E) For a given absolute change in a bond's yield-to-maturity, a decrease in yield will cause a greater change in the bond's price than will an increase in yield.

Question 19

A $1,000 par value 5 percent Treasury bond pays interest semiannually and matures in 7.5 years.What is the yield to maturity if the bond is currently quoted at a price of 112.34?

Accepted Answer

A) 3.14 percent 
B) 3.18 percent 
C) 3.23 percent 
D) 6.28 percent 
E) 6.36 percent 
A) 3.14 percent 
B) 3.18 percent 
C) 3.23 percent 
D) 6.28 percent 
E) 6.36 percent

Question 20

Which one of the following will occur if a bond's discount rate is lowered?

Accepted Answer

A) market price will increase 
B) coupon payment amount will decrease 
C) current yield will increase 
D) call premium will increase 
E) coupon rate will decrease 
A) market price will increase 
B) coupon payment amount will decrease 
C) current yield will increase 
D) call premium will increase 
E) coupon rate will decrease

Which one of the following increases the probability that a bond will be called?

A bond has a current yield that is equal to the yield-to-maturity.Given this,which one of the following must also be true?

Last year,BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest payments.What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?

A $1,000 semiannual coupon bond matures in 15 years,has a coupon rate of 7.5 percent,and a market price of $982.What is the yield to maturity?

For a premium bond,the:

Identify and briefly explain four of Malkiel's five theorems.

Which one of the following statements is correct concerning Macaulay duration?

A bond pays interest semiannually on February 1 and August 1.Assume today is October 1.How many months of accrued interest are included in the clean price of this bond?

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest.The par value is $1,000 per bond and the market value is $990.The coupon rate is ___ percent,the current yield is _ percent,and the yield to maturity is ___ percent.

A premium bond is defined as a bond that:

The yield value of a 32^nd is the change needed in which one of the following to cause a bond's price to change by 1/32^nd?

A bond has a $1,000 par value,semiannual interest payments of $40,and a current market value of $1,054.The bonds mature in 12.5 years.The coupon rate is ___ percent,the current yield is _ percent,and the yield to maturity is ___ percent.

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

A bond has a dollar value of an 01 of .0684.What is the yield value of a 32^nd?

Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default.Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

A bond has a par value of $1,000,a market price of $1,012,and a coupon rate of 5.75 percent.What is the current yield?

Which one of the following statements is correct according to Malkiel's Theorems?

A $1,000 par value 5 percent Treasury bond pays interest semiannually and matures in 7.5 years.What is the yield to maturity if the bond is currently quoted at a price of 112.34?

Which one of the following will occur if a bond's discount rate is lowered?

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Return, Risk, and the Security Market Line

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Exam 10: Bond Prices and Yields

Which one of the following increases the probability that a bond will be called?

A bond has a current yield that is equal to the yield-to-maturity.Given this,which one of the following must also be true?

Last year,BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest payments.What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?

A $1,000 semiannual coupon bond matures in 15 years,has a coupon rate of 7.5 percent,and a market price of $982.What is the yield to maturity?

For a premium bond,the:

Identify and briefly explain four of Malkiel's five theorems.

Which one of the following statements is correct concerning Macaulay duration?

A bond pays interest semiannually on February 1 and August 1.Assume today is October 1.How many months of accrued interest are included in the clean price of this bond?

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest.The par value is $1,000 per bond and the market value is $990.The coupon rate is _____ percent,the current yield is _____ percent,and the yield to maturity is _____ percent.

A premium bond is defined as a bond that:

The yield value of a 32nd is the change needed in which one of the following to cause a bond's price to change by 1/32nd?

A bond has a $1,000 par value,semiannual interest payments of $40,and a current market value of $1,054.The bonds mature in 12.5 years.The coupon rate is _____ percent,the current yield is _____ percent,and the yield to maturity is _____ percent.

A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

A bond has a dollar value of an 01 of .0684.What is the yield value of a 32nd?

Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default.Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

A bond has a par value of $1,000,a market price of $1,012,and a coupon rate of 5.75 percent.What is the current yield?

Which one of the following statements is correct according to Malkiel's Theorems?

A $1,000 par value 5 percent Treasury bond pays interest semiannually and matures in 7.5 years.What is the yield to maturity if the bond is currently quoted at a price of 112.34?

Which one of the following will occur if a bond's discount rate is lowered?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6 months in interest.The par value is $1,000 per bond and the market value is $990.The coupon rate is ___ percent,the current yield is _ percent,and the yield to maturity is ___ percent.

The yield value of a 32^nd is the change needed in which one of the following to cause a bond's price to change by 1/32^nd?

A bond has a $1,000 par value,semiannual interest payments of $40,and a current market value of $1,054.The bonds mature in 12.5 years.The coupon rate is ___ percent,the current yield is _ percent,and the yield to maturity is ___ percent.

A bond has a dollar value of an 01 of .0684.What is the yield value of a 32^nd?