Question 1

A 9% coupon bond with an ask price of 100: 00 pays interest every 182 days.If the bond paid interest 112 days ago,the invoice price of the bond would be

Accepted Answer

A) 1,027.69 
B) 1,027.35 
C) 1,026.77 
D) 1,027.98 
E) 1,028.15 
A) 1,027.69 
B) 1,027.35 
C) 1,026.77 
D) 1,027.98 
E) 1,028.15

Question 2

A coupon bond that pays interest of $90 annually has a par value of $1,000,matures in 9 years,and is selling today at a $66 discount from par value.The yield to maturity on this bond is __________.

Accepted Answer

A) 9.00% 
B) 10.15% 
C) 11.25% 
D) 12.32% 
E) none of the above 
A) 9.00% 
B) 10.15% 
C) 11.25% 
D) 12.32% 
E) none of the above

Question 3

If a 6.75% coupon bond is trading for $1016.00,it has a current yield of ____________ percent.

Accepted Answer

A) 7.38 
B) 6.64 
C) 7.25 
D) 8.53 
E) 7.18 
A) 7.38 
B) 6.64 
C) 7.25 
D) 8.53 
E) 7.18

Question 4

What is the relationship between the price of a straight bond and the price of a callable bond?

Accepted Answer

A) The straight bond's price will be higher than the callable bond's price for low interest rates. 
B) The straight bond's price will be lower than the callable bond's price for low interest rates. 
C) The straight bond's price will change as interest rates change, but the callable bond's price will stay the same. 
D) The straight bond and the callable bond will have the same price. 
E) There is no consistent relationship between the two types of bonds. 
A) The straight bond's price will be higher than the callable bond's price for low interest rates. 
B) The straight bond's price will be lower than the callable bond's price for low interest rates. 
C) The straight bond's price will change as interest rates change, but the callable bond's price will stay the same. 
D) The straight bond and the callable bond will have the same price. 
E) There is no consistent relationship between the two types of bonds.

Question 5

If a 7.75% coupon bond is trading for $1019.00,it has a current yield of ____________ percent.

Accepted Answer

A) 7.38 
B) 6.64 
C) 7.25 
D) 7.61 
E) 7.18 
A) 7.38 
B) 6.64 
C) 7.25 
D) 7.61 
E) 7.18

Question 6

A coupon bond pays annual interest,has a par value of $1,000,matures in 4 years,has a coupon rate of 10%,and has a yield to maturity of 12%.The current yield on this bond is ___________.

Accepted Answer

A) 10.65% 
B) 10.45% 
C) 10.95% 
D) 10.52% 
E) none of the above 
A) 10.65% 
B) 10.45% 
C) 10.95% 
D) 10.52% 
E) none of the above

Question 7

One year ago,you purchased a newly issued TIPS bond that has a 5% coupon rate,five years to maturity,and a par value of $1,000.The average inflation rate over the year was 3.2%.What is the amount of the coupon payment you will receive and what is the current face value of the bond?

Accepted Answer

A) $50.00, $1,000 
B) $32.00, $1,032 
C) $50.00, $1,032 
D) $32.00, $1,050 
E) $51.60,$1,032 
A) $50.00, $1,000 
B) $32.00, $1,032 
C) $50.00, $1,032 
D) $32.00, $1,050 
E) $51.60,$1,032

Question 8

Consider the following $1,000 par value zero-coupon bonds: $$\begin{array} { l | l | l | } 
\underline { \text { Bond } } & \underline { \text { Years to Maturity } } & \underline { \text { Price } } \
\hline \mathrm { A } & \mathbf { 1 } & \$ 909.09 \
\hline \mathrm { B } & 2 & \$ 811.62 \
\hline \mathrm { C } & 3 & \$ 711.78 \
\hline \mathrm { D } & 4 & \$ 635.52 \
\hline
\end{array}$$
-The yield to maturity on bond A is ____________.

Accepted Answer

A) 10% 
B) 11% 
C) 12% 
D) 14% 
E) none of the above 
A) 10% 
B) 11% 
C) 12% 
D) 14% 
E) none of the above

Question 9

Of the following four investments,________ is considered the least risky.

Accepted Answer

A) Treasury bills 
B) corporate bonds 
C) U.S.Agency issues 
D) Treasury bonds 
E) commercial paper 
A) Treasury bills 
B) corporate bonds 
C) U.S.Agency issues 
D) Treasury bonds 
E) commercial paper

Question 10

A Treasury bill with a par value of $100,000 due three months from now is selling today for $97,087,with an effective annual yield of _________.

Accepted Answer

A) 12.40% 
B) 12.55% 
C) 12.62% 
D) 12.68% 
E) none of the above 
A) 12.40% 
B) 12.55% 
C) 12.62% 
D) 12.68% 
E) none of the above

Question 11

Swingin' Soiree,Inc.is a firm that has its main office on the Right Bank in Paris.The firm just issued bonds with a final payment amount that depends on whether the Seine River floods.This type of bond is known as

Accepted Answer

A) a contingency bond 
B) a catastrophe bond 
C) an emergency bond 
D) an incident bond 
E) an eventuality bond 
A) a contingency bond 
B) a catastrophe bond 
C) an emergency bond 
D) an incident bond 
E) an eventuality bond

Question 12

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 6 years,and has a yield to maturity of 9%.The intrinsic value of the bond today will be __________ if the coupon rate is 9%.

Accepted Answer

A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,000.00 
E) none of the above 
A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,000.00 
E) none of the above

Question 13

The ______ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity.

Accepted Answer

A) current yield 
B) dividend yield 
C) P/E ratio 
D) yield to maturity 
E) discount yield 
A) current yield 
B) dividend yield 
C) P/E ratio 
D) yield to maturity 
E) discount yield

Question 14

A 10% coupon,annual payments,bond maturing in 10 years,is expected to make all coupon payments,but to pay only 50% of par value at maturity.What is the expected yield on this bond if the bond is purchased for $975?

Accepted Answer

A) 10.00%. 
B) 6.68%. 
C) 11.00%. 
D) 8.68%. 
E) none of the above. 
A) 10.00%. 
B) 6.68%. 
C) 11.00%. 
D) 8.68%. 
E) none of the above.

Question 15

A coupon bond pays annual interest,has a par value of $1,000,matures in 12 years,has a coupon rate of 11%,and has a yield to maturity of 12%.The current yield on this bond is ___________.

Accepted Answer

A) 10.39% 
B) 10.43% 
C) 10.58% 
D) 10.66% 
E) none of the above 
A) 10.39% 
B) 10.43% 
C) 10.58% 
D) 10.66% 
E) none of the above

Question 16

Callable bonds

Accepted Answer

A) are called when interest rates decline appreciably. 
B) have a call price that declines as time passes. 
C) are called when interest rates increase appreciably. 
D) A and B. 
E) B and C. 
A) are called when interest rates decline appreciably. 
B) have a call price that declines as time passes. 
C) are called when interest rates increase appreciably. 
D) A and B. 
E) B and C.

Question 17

If you are buying a coupon bond between interest paying dates,is the amount you would pay to your broker for the bond more or less than the amount quoted in the financial quotation pages? Discuss the differences and how these differences arise.

Accepted Answer

If you are buying a bond between interes

Question 18

The bonds of Ford Motor Company have received a rating of "B" by Moody's.The "B" rating indicates

Accepted Answer

A) the bonds are insured 
B) the bonds are junk bonds 
C) the bonds are referred to as "high yield" bonds 
D) A and B 
E) B and C 
A) the bonds are insured 
B) the bonds are junk bonds 
C) the bonds are referred to as "high yield" bonds 
D) A and B 
E) B and C

Question 19

Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%.If interest rates remain constant,one year from now the price of this bond will be _______.

Accepted Answer

A) higher 
B) lower 
C) the same 
D) cannot be determined 
E) $1,000 
A) higher 
B) lower 
C) the same 
D) cannot be determined 
E) $1,000

Question 20

Collateralized bonds

Accepted Answer

A) rely on the general earning power of the firm for the bond's safety. 
B) are backed by specific assets of the issuing firm. 
C) are considered the safest variety of bonds. 
D) all of the above are true. 
E) both B and C are true. 
A) rely on the general earning power of the firm for the bond's safety. 
B) are backed by specific assets of the issuing firm. 
C) are considered the safest variety of bonds. 
D) all of the above are true. 
E) both B and C are true.

Exam 14: Bond Prices and Yields

A 9% coupon bond with an ask price of 100: 00 pays interest every 182 days.If the bond paid interest 112 days ago,the invoice price of the bond would be

A coupon bond that pays interest of $90 annually has a par value of $1,000,matures in 9 years,and is selling today at a $66 discount from par value.The yield to maturity on this bond is __________.

If a 6.75% coupon bond is trading for $1016.00,it has a current yield of ____________ percent.

What is the relationship between the price of a straight bond and the price of a callable bond?

If a 7.75% coupon bond is trading for $1019.00,it has a current yield of ____________ percent.

A coupon bond pays annual interest,has a par value of $1,000,matures in 4 years,has a coupon rate of 10%,and has a yield to maturity of 12%.The current yield on this bond is ___________.

One year ago,you purchased a newly issued TIPS bond that has a 5% coupon rate,five years to maturity,and a par value of $1,000.The average inflation rate over the year was 3.2%.What is the amount of the coupon payment you will receive and what is the current face value of the bond?

Consider the following $1,000 par value zero-coupon bonds: \ 909.09 2 \ 811.62 3 \ 711.78 4 \ 635.52 -The yield to maturity on bond A is ____________.

Of the following four investments,________ is considered the least risky.

A Treasury bill with a par value of $100,000 due three months from now is selling today for $97,087,with an effective annual yield of _________.

Swingin' Soiree,Inc.is a firm that has its main office on the Right Bank in Paris.The firm just issued bonds with a final payment amount that depends on whether the Seine River floods.This type of bond is known as

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 6 years,and has a yield to maturity of 9%.The intrinsic value of the bond today will be __________ if the coupon rate is 9%.

The ______ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity.

A 10% coupon,annual payments,bond maturing in 10 years,is expected to make all coupon payments,but to pay only 50% of par value at maturity.What is the expected yield on this bond if the bond is purchased for $975?

A coupon bond pays annual interest,has a par value of $1,000,matures in 12 years,has a coupon rate of 11%,and has a yield to maturity of 12%.The current yield on this bond is ___________.

Callable bonds

If you are buying a coupon bond between interest paying dates,is the amount you would pay to your broker for the bond more or less than the amount quoted in the financial quotation pages? Discuss the differences and how these differences arise.

The bonds of Ford Motor Company have received a rating of "B" by Moody's.The "B" rating indicates

Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%.If interest rates remain constant,one year from now the price of this bond will be _______.

Collateralized bonds

The Investment Environment

Asset Classes and Financial Instruments

How Securities are Traded

Mutual Funds and Other Investment Companies

Introduction to Risk,return,and the Historical Record

Risk Aversion and Capital Allocation to Risky Assets

Optimal Risky Portfolios

Index Models

The Capital Asset Pricing Model

Arbitrage Pricing Theory and Multifactor Models of Risk and Return

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Empirical Evidence on Security Returns

The Term Structure of Interest Rates

Managing Bond Portfolios

Options Markets: Introduction

Option Valuation

Futures Markets

Futures, swaps, and Risk Management

Macroeconomic and Industry Analysis

Equity Valuation Models

Financial Statement Analysis

Portfolio Performance Evaluation

International Diversification

Hedge Funds

The Theory of Active Portfolio Management

Investment Policy and the Framework of the CFA Institute Appendices

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