Question 1

Which of the following is not a type of international bond? $$\begin{array} { | l | l | } 
\hline \text { Time } & \text { Prevailing Reinvestment Rate } \
\hline 0 \text { (purchasedate) } & 6.0 \% \
\hline1 & 7.2 \% \
\hline 2 & 9.4 \% \
\hline 3 \text { (maturity date) } & 8.2 \% \

\hline
\end{array}$$

Accepted Answer

A) Samurai bonds 
B) Yankee bonds 
C) bulldog bonds 
D) Elton bonds 
E) All of the above are international bonds. 
A) Samurai bonds 
B) Yankee bonds 
C) bulldog bonds 
D) Elton bonds 
E) All of the above are international bonds.

Question 2

A convertible bond has a par value of $1,000 and a current market price of $975.The current price of the issuing firm's stock is $42 and the conversion ratio is 22 shares.The bond's market conversion value is ______.

Accepted Answer

A) $729 
B) $924 
C) $870 
D) $1,000 
E) none of the above 
A) $729 
B) $924 
C) $870 
D) $1,000 
E) none of the above

Question 3

The bond market

Accepted Answer

A) can be quite "thin". 
B) primarily consists of a network of bond dealers in the over the counter market. 
C) consists of many investors on any given day. 
D) A and B. 
E) B and C. 
A) can be quite "thin". 
B) primarily consists of a network of bond dealers in the over the counter market. 
C) consists of many investors on any given day. 
D) A and B. 
E) B and C.

Question 4

If a 7% coupon bond that pays interest every 182 days paid interest 32 days ago,the accrued interest would be

Accepted Answer

A) 5.67 
B) 7.35 
C) 6.35 
D) 6.15 
E) 7.12 
A) 5.67 
B) 7.35 
C) 6.35 
D) 6.15 
E) 7.12

Question 5

A zero-coupon bond is one that

Accepted Answer

A) effectively has a zero percent coupon rate. 
B) pays interest to the investor based on the general level of interest rates, rather than at a specified coupon rate. 
C) pays interest to the investor without requiring the actual coupon to be mailed to the corporation. 
D) is issued by state governments because they don't have to pay interest. 
E) is analyzed primarily by focusing ("zeroing in")on the coupon rate. 
A) effectively has a zero percent coupon rate. 
B) pays interest to the investor based on the general level of interest rates, rather than at a specified coupon rate. 
C) pays interest to the investor without requiring the actual coupon to be mailed to the corporation. 
D) is issued by state governments because they don't have to pay interest. 
E) is analyzed primarily by focusing ("zeroing in")on the coupon rate.

Question 6

The current yield on a bond is equal to ________.

Accepted Answer

A) annual interest payment divided by the current market price 
B) the yield to maturity 
C) annual interest divided by the par value 
D) the internal rate of return 
E) none of the above 
A) annual interest payment divided by the current market price 
B) the yield to maturity 
C) annual interest divided by the par value 
D) the internal rate of return 
E) none of the above

Question 7

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 D 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 8

A bond with a 12% coupon,10 years to maturity and selling at 88: 00 has a yield to maturity of _______.

Accepted Answer

A) over 14% 
B) between 13% and 14% 
C) between 12% and 13% 
D) between 10% and 12% 
E) less than 12% 
A) over 14% 
B) between 13% and 14% 
C) between 12% and 13% 
D) between 10% and 12% 
E) less than 12%

Question 9

Using semiannual compounding,a 15-year zero coupon bond that has a par value of $1,000 and a required return of 8% would be priced at approximately ______.

Accepted Answer

A) $308 
B) $315 
C) $464 
D) $555 
E) none of the above 
A) $308 
B) $315 
C) $464 
D) $555 
E) none of the above

Question 10

A 7% coupon bond with an ask price of 100: 00 pays interest every 182 days.If the bond paid interest 32 days ago,the invoice price of the bond would be

Accepted Answer

A) 1,005.67 
B) 1,007.35 
C) 1,006.35 
D) 1,006.15 
E) 1,007.12 
A) 1,005.67 
B) 1,007.35 
C) 1,006.35 
D) 1,006.15 
E) 1,007.12

Question 11

A Treasury bill with a par value of $100,000 due two months from now is selling today for $98,039,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 12

Debt securities are often called fixed-income securities because

Accepted Answer

A) the government fixes the maximum rate that can be paid on bonds. 
B) they are held predominantly by older people who are living on fixed incomes. 
C) they pay a fixed amount at maturity. 
D) they promise either a fixed stream of income or a stream of income determined by a specific formula. 
E) they were the first type of investment offered to the public,which allowed them to "fix" their income at a higher level by investing in bonds. 
A) the government fixes the maximum rate that can be paid on bonds. 
B) they are held predominantly by older people who are living on fixed incomes. 
C) they pay a fixed amount at maturity. 
D) they promise either a fixed stream of income or a stream of income determined by a specific formula. 
E) they were the first type of investment offered to the public,which allowed them to "fix" their income at a higher level by investing in bonds.

Question 13

A credit default swap is

Accepted Answer

A) a fancy term for a low risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) A and B. 
E) none of the above 
A) a fancy term for a low risk bond. 
B) an insurance policy on the default risk of a federal government bond or loan. 
C) an insurance policy on the default risk of a corporate bond or loan. 
D) A and B. 
E) none of the above

Question 14

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 C is ____________.
Refer To:
1456

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 15

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 9.3%.The intrinsic value of the bond today will be ________ if the coupon rate is 9.5%.

Accepted Answer

A) $922.77 
B) $1,010.12 
C) $1,075.80 
D) $1,077.22 
E) none of the above 
A) $922.77 
B) $1,010.12 
C) $1,075.80 
D) $1,077.22 
E) none of the above

Question 16

One year ago,you purchased a newly issued TIPS bond that has a 6% coupon rate,five years to maturity,and a par value of $1,000.The average inflation rate over the year was 4.2%.What is the amount of the coupon payment you will receive and what is the current face value of the bond?

Accepted Answer

A) $60.00, $1,000 
B) $42.00, $1,042 
C) $60.00, $1,042 
D) $62.52, $1,042 
E) $102.00,$1,000 
A) $60.00, $1,000 
B) $42.00, $1,042 
C) $60.00, $1,042 
D) $62.52, $1,042 
E) $102.00,$1,000

Question 17

You purchased a zero-coupon bond that has a face value of $1,000,five years to maturity,and a yield to maturity of 7.3%.It is one year later and similar bonds are offering a yield to maturity of 8.1%.You will sell the bond now.You have a tax rate of 40% on regular income and 15% on capital gains.Calculate the following for this bond.
• the purchase price of the bond
• the current price of the bond
• the imputed interest income
• the capital gain (or loss)on the bond
• the before-tax rate of return on this investment
• the after-tax rate of return on this investment

Accepted Answer

Calculatio

Question 18

The yield to maturity on a bond is ________.

Accepted Answer

A) below the coupon rate when the bond sells at a discount,and equal to the coupon rate when the bond sells at a premium 
B) the discount rate that will set the present value of the payments equal to the bond price 
C) based on the assumption that any payments received are reinvested at the coupon rate 
D) none of the above. 
E) A,B,and C. 
A) below the coupon rate when the bond sells at a discount,and equal to the coupon rate when the bond sells at a premium 
B) the discount rate that will set the present value of the payments equal to the bond price 
C) based on the assumption that any payments received are reinvested at the coupon rate 
D) none of the above. 
E) A,B,and C.

Question 19

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be __________ if the coupon rate is 8%.

Accepted Answer

A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,077.20 
E) none of the above 
A) $922.78 
B) $924.16 
C) $1,075.80 
D) $1,077.20 
E) none of the above

Question 20

You purchased an annual interest coupon bond one year ago that had 9 years remaining to maturity at that time.The coupon interest rate was 10% and the par value was $1,000.At the time you purchased the bond,the yield to maturity was 8%.If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%,your annual total rate of return on holding the bond for that year would have been _________.

Accepted Answer

A) 8.00% 
B) 7.82% 
C) 7.00% 
D) 11.95% 
E) none of the above 
A) 8.00% 
B) 7.82% 
C) 7.00% 
D) 11.95% 
E) none of the above

Exam 14: Bond Prices and Yields

Which of the following is not a type of international bond? Time Prevailing Reinvestment Rate 0 (purchasedate) 6.0\% 1 7.2\% 2 9.4\% 3 (maturity date) 8.2\%

A convertible bond has a par value of $1,000 and a current market price of $975.The current price of the issuing firm's stock is $42 and the conversion ratio is 22 shares.The bond's market conversion value is ______.

The bond market

If a 7% coupon bond that pays interest every 182 days paid interest 32 days ago,the accrued interest would be

A zero-coupon bond is one that

The current yield on a bond is equal to ________.

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 D is _______.

A bond with a 12% coupon,10 years to maturity and selling at 88: 00 has a yield to maturity of _______.

Using semiannual compounding,a 15-year zero coupon bond that has a par value of $1,000 and a required return of 8% would be priced at approximately ______.

A 7% coupon bond with an ask price of 100: 00 pays interest every 182 days.If the bond paid interest 32 days ago,the invoice price of the bond would be

A Treasury bill with a par value of $100,000 due two months from now is selling today for $98,039,with an effective annual yield of _________.

Debt securities are often called fixed-income securities because

A credit default swap is

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 C is ____________. Refer To: 1456

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 9.3%.The intrinsic value of the bond today will be ________ if the coupon rate is 9.5%.

One year ago,you purchased a newly issued TIPS bond that has a 6% coupon rate,five years to maturity,and a par value of $1,000.The average inflation rate over the year was 4.2%.What is the amount of the coupon payment you will receive and what is the current face value of the bond?

The yield to maturity on a bond is ________.

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be __________ if the coupon rate is 8%.

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

Filters