Exam 7: The Valuation and Characteristics of Bonds

What is the yield to maturity of a bond that pays an 5% coupon rate with annual coupon payments,has a par value of $1,000,matures in 15 years,and is currently selling for $769?

Swanson,Inc.bonds have a 10% coupon rate with semi-annual coupon payments.They have 12 and 1/2 years to maturity and a par value of $1,000.Compute the value of Swanson's bonds if investors' required rate of return is 8%.

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

When using the PV (present value)function in Excel to calculate bond values,the bond's coupon rate is entered as the Rate variable.

The yield to maturity on a bond is the rate of return that equates the present value of the bond's future cash flows with the bond's

Bartiromo,Inc.bonds have a 4% coupon rate with semi-annual 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 Bartiromo's bonds?

What is the value of a bond that matures in 5 years,has an annual coupon payment of $110,and a par value of $2,000? Assume a required rate of return of 7%.

Speculative,or non-investment-grade,bonds have an S&P bond rating of

A $1,000 par value 14-year bond with a 10 percent coupon rate recently sold for $965.The yield to maturity is

Bond A has a current yield of 6% and Bond B has a current yield of 8%.If the market price of both bonds is the same,then the yield to maturity on Bond B must be higher than the yield to maturity on Bond A.

Put the following in order of their claim on assets of a firm,starting with the LAST to have a claim: A.Subordinated debentures B.Debentures (unsubordinated) C.Common Stock D.Preferred stock

Two bonds are identical except for their maturity.The bonds have a coupon rate that is greater than their yield to maturity.Which of the following is true when comparing the two bonds?

A bond rating of "BB" indicates that the company's financial position is above average and hence the default risk on the bonds is very low.

Ajax Corp issued 25 year bonds in 2002 with a coupon rate of 6% and a face value of $1,000.The bonds sold for face value when issued.Since 2002,interest rates have increased,so the going rate on similar bonds is now 9%.Which of the following statements is most accurate?

Bonds generally have a maturity date while preferred stocks do not.

The current yield is greater than the coupon rate for a bond selling above par value.

While checking the Wall Street Journal bond listings you notice that the price of an AT&T bond is the same as the price of a K-Mart bond.Based on this information you know that

Which of the following is FALSE concerning bonds?

Subordinated debentures are more risky than unsubordinated debentures because the claims of subordinated debenture holders are less likely to be honored in the event of liquidation.

The yield-to-maturity is the discount rate that equates the present value of the interest and principal payments with the face value of the bond.