Exam 9: Bond Prices and Yields

A discount bond that pays interest semiannually will ________. I. have a lower price than an equivalent annual payment bond II. have a higher EAR than an equivalent annual payment bond III. sell for less than its conversion value

You can be sure that a bond will sell at a premium to par when its coupon rate is ________.

In an era of particularly low interest rates, which of the following bonds is most likely to be called?

A callable bond pays annual interest of $60, has a par value of $1 000, matures in 20 years but is callable in 10 years at a price of $1 100, and has a value today of $1 055.84. The yield to call on this bond is ________.

A coupon bond pays semi-annual interest is reported as having an ask price of 117% of its $1 000 par value in the Wall Street Journal. If the last interest payment was made 2 months ago and the coupon rate is 6%, the invoice price of the bond will be ________.

Bonds with coupon rates that fall when the general level of interest rates rise are called ________.

The ________ of a bond is computed as the ratio of coupon payments to market price.

TIPS offer investors inflation protection by increasing ________ by the inflation rate each year.

A coupon bond which pays interest annually, has a par value of $1 000, matures in 5 years and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be approximately ________.

A bond was purchased at a premium and is now selling at a discount because of a change in market interest rates. If the bond pays a 4% annual coupon, what is the likely impact on the holding period return in an investor decides to sell now?

Bonds rated ________ or better by Standard and Poor's are considered investment grade.

You would typically find all but which one of the following in a bond contract?

A bond has a par value of $1 000, a time to maturity of 10 years, and a coupon rate of 8% with interest paid annually. If the current market price is $750, what is the approximate capital gain yield of this bond over the next year?

The primary difference between Treasury notes and bonds is ________.

________ bonds represent a novel way of obtaining insurance from capital markets against specified disasters.

A bond has a flat price of $985 and it pays an annual coupon. The last coupon payment was made 90 days ago. What is the invoice price if the annual coupon is $69?

According to the liquidity preference theory of the term structure of interest rates an increase in the yield on long-term corporate bonds versus short-term bonds could be due to ________.

To earn a high rating from the bond rating agencies, a company would want to have ________. I. a low times-interest-earned ratio II. a low debt-to-equity ratio III. a high quick ratio

A convertible bond has a par value of $1 000 but its current market price is $950. The current price of the issuing company's shares is $19 and the conversion ratio is 40 shares. The bond's conversion premium is ________.

You buy an 8-year $1000 par value bond today that has a 6% yield and a 6% annual payment coupon. In one year promised yields have risen to 7%. Your one year holding period return was ________.