Exam 7: The Valuation and Characteristics of Bonds

Assume that Bunch Inc.has an issue of 18-year $1,000 par value bonds that pay 7% interest,annually.Further assume that today's required rate of return on these bonds is 5%.How much would these bonds sell for today? Round off to the nearest $1.

(Multiple Choice)

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Question 21

If market interest rates decline

(Multiple Choice)

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Question 22

An example of a Eurobond is a bond issued in Asia by a U.S.Corporation with interest and principal payments made in U.S.dollars.

(True/False)

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Question 23

Messenger,Inc.bonds have a 4% coupon rate with semiannual coupon payments and a $1,000 par value.The bonds have 11 years until maturity,and sell for $925.What is the current yield for Messinger's bonds?

(Multiple Choice)

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Question 24

Charlie Corporation has two bonds outstanding.Both bonds mature in 10 years,have a face value of $1,000,and have a yield to maturity of 8%.One bond is a zero coupon bond and the other bond has a coupon rate of 8%.Which of the following statements is true?

(Multiple Choice)

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Question 25

A bond selling at a discount will have a built-in capital gain if the bond is held to maturity.

(True/False)

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Question 26

A Johnson corporation bond is currently selling for $850.The bond matures in 20 years,has a face value of $1,000,and a yield to maturity of 10.55%.The bond's coupon rate is

(Multiple Choice)

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Question 27

If a bond has a market value that is higher than its par value,then the required return on the bond must be less than the bond's coupon rate.

(True/False)

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Question 28

Bryant Inc.just issued $1,000 par 30-year bonds.The bonds sold for $1,107.20 and pay interest semiannually.Investors require a rate of 7.75% on the bonds.What is the bonds' coupon rate?

(Multiple Choice)

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Question 29

If two bonds have the same yield to maturity,they also have the same current yield.

(True/False)

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Question 30

If markets were entirely efficient (perfect),which of the following would we conclude?

(Multiple Choice)

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Question 31

Two investors are considering the purchase of Corporation LMQ bonds.The bonds are selling at their par value of $1,000 with a coupon rate of 9%.Investor A decides to buy the bonds and Investor B does not buy the bonds.

(Multiple Choice)

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Question 32

Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price.

(True/False)

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Question 33

If a corporation were to choose between issuing a debenture,a mortgage bond,or a subordinated debenture,which would have the highest yield to maturity,everything else equal?

(Multiple Choice)

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Question 34

Define interest rate risk.How does a bond's level of interest rate risk depend on its maturity?

(Essay)

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Question 35

What is the value of a bond that has a par value of $1,000,a coupon of $120 (annually),and matures in 10 years? Assume a required rate of return of 7.02%.

(Multiple Choice)

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Question 36

In 2000 Jenson Inc.issued bonds with an 8 percent coupon rate and a $1,000 face value.The bonds mature on March 1,2025.If an investor purchased one of these bonds on March 1,2012,determine the yield to maturity if the investor paid $1,100 for the bond.

(Multiple Choice)

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Question 37

Which of the following statements is true?

(Multiple Choice)

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Question 38

PBJ Corporation issued bonds on January 1,2006.The bonds had a coupon rate of 5.5%,with interest paid semiannually.The face value of the bonds is $1,000 and the bonds mature on January 1,2021.What is the yield to maturity for an PBJ Corporation bond on January 1,2012 if the market price of the bond on that date is $950?

(Multiple Choice)

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Question 39

Finance theory suggests that the current market value of a bond is based upon which of the following?

(Multiple Choice)

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Question 40

Showing 21 - 40 of 145

Assume that Bunch Inc.has an issue of 18-year $1,000 par value bonds that pay 7% interest,annually.Further assume that today's required rate of return on these bonds is 5%.How much would these bonds sell for today? Round off to the nearest $1.

If market interest rates decline

An example of a Eurobond is a bond issued in Asia by a U.S.Corporation with interest and principal payments made in U.S.dollars.

Messenger,Inc.bonds have a 4% coupon rate with semiannual coupon payments and a $1,000 par value.The bonds have 11 years until maturity,and sell for $925.What is the current yield for Messinger's bonds?

Charlie Corporation has two bonds outstanding.Both bonds mature in 10 years,have a face value of $1,000,and have a yield to maturity of 8%.One bond is a zero coupon bond and the other bond has a coupon rate of 8%.Which of the following statements is true?

A bond selling at a discount will have a built-in capital gain if the bond is held to maturity.

A Johnson corporation bond is currently selling for $850.The bond matures in 20 years,has a face value of $1,000,and a yield to maturity of 10.55%.The bond's coupon rate is

If a bond has a market value that is higher than its par value,then the required return on the bond must be less than the bond's coupon rate.

Bryant Inc.just issued $1,000 par 30-year bonds.The bonds sold for $1,107.20 and pay interest semiannually.Investors require a rate of 7.75% on the bonds.What is the bonds' coupon rate?

If two bonds have the same yield to maturity,they also have the same current yield.

If markets were entirely efficient (perfect),which of the following would we conclude?

Two investors are considering the purchase of Corporation LMQ bonds.The bonds are selling at their par value of $1,000 with a coupon rate of 9%.Investor A decides to buy the bonds and Investor B does not buy the bonds.

Convertible bonds are debt securities that can be converted into a firm's stock at a prespecified price.

If a corporation were to choose between issuing a debenture,a mortgage bond,or a subordinated debenture,which would have the highest yield to maturity,everything else equal?

Define interest rate risk.How does a bond's level of interest rate risk depend on its maturity?

What is the value of a bond that has a par value of $1,000,a coupon of $120 (annually),and matures in 10 years? Assume a required rate of return of 7.02%.

In 2000 Jenson Inc.issued bonds with an 8 percent coupon rate and a $1,000 face value.The bonds mature on March 1,2025.If an investor purchased one of these bonds on March 1,2012,determine the yield to maturity if the investor paid $1,100 for the bond.

Which of the following statements is true?

Finance theory suggests that the current market value of a bond is based upon which of the following?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Cash,receivables,and Inventory Management

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