Exam 7: Valuing Bonds

Consider a 2.75 percent TIPS with an issue CPI reference of 184.2. At the beginning of this year, the CPI was 195.4 and was at 200.5 at the end of the year. What was the capital gain of the TIPS in dollars?

What's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70?

Which of these statements is false?

Which of the following is a true statement?

Calculate the price of a zero coupon bond that matures in five years if the market interest rate is 7.50 percent. (Assume semi-annual compounding and $1,000 par value.)

A bond with 14 years to maturity is selling for $1,070 and has a yield to maturity of 10.06 percent. If this bond pays its coupon payments semi-annually and par value is $1,000, what is the bond's annual coupon rate?

Possible shapes for the yield curve include all of the following EXCEPT:

What's the current yield of a 5.75 percent coupon corporate bond quoted at a price of 103.05?

Which of the following would NOT be an example of an agency bond?

What's the taxable equivalent yield on a municipal bond with a yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket?

Compute the price of a 6 percent coupon bond with 10 years left to maturity and a market interest rate of 8.75 percent. (Assume interest payments are semi-annual and par value is $1,000.) Is this a discount or premium bond?

Which of the following bonds carry significant risk that the issuer will not make current or future payments?

Rank from lowest credit risk to highest credit risk the following bonds, with the same time to maturity, by their yield to maturity: Treasury bond with yield of 5.55 percent, IBM bond with yield of 7.95 percent, Trump Casino bond with a yield of 9.15 percent and Banc Ono bond with a yield of 6.12 percent.

Which of the following is NOT a factor that determines the coupon rate of a company's bonds?

A bond issued by a corporation on June 15, 2007, is scheduled to mature on June 15, 2017. If today is December 16, 2008, what is this bond's time to maturity? (Assume annual interest payments.)

Which of the following terms is a comparison of market yields on securities, assuming all characteristics except maturity are the same?

A 7.25 percent coupon bond with 25 years left to maturity can be called in five years. The call premium is one year of coupon payments. It is offered for sale at $1,066.24. What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and par value is $1,000.)

Which of the following statements is correct?

What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?

A client in the 33 percent marginal tax bracket is comparing a municipal bond that offers a 5 percent yield to maturity and a similar-risk corporate bond that offers a 6.25 percent yield. Which bond will give the client more profit after taxes?