Exam 7: The Valuation and Characteristics of Bonds

Two investors are considering the purchase of Corporation XYZ bonds.The bonds are selling at a price of $1,100 each.Investor A decides to buy the bonds and Investor B does not buy the bonds.

Aaron 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?

Bonds issued in a country different from the one in which the currency of the bond is denominated are called Eurobonds.

GART,Inc.has issued a $1,000 par 4% annual coupon bond that is to mature in 18 years.If your required rate of return is 6.5%,what price would you be willing to pay for the bond?

A corporate bond has a coupon rate of 9%,a face value of $1,000,and matures in 15 years.Which of the following statements is most correct?

Due to a number of lawsuits related to toxic wastes,a major chemical company has recently experienced a market revaluation.The firm has bonds outstanding that were issued 8 years ago at their par value of $1,000.These bonds have 12 years to maturity and a coupon rate of 6 percent,with interest paid semiannually.The required return on these bonds has increased to 14 percent.What is the current value of one of these bonds?

John owns a corporate bond with a coupon rate of 8% that matures in 10 years.Bill owns a corporate bond with a coupon rate of 12% that matures in 25 years.If interest rates go down,then

A bond with a par value of $1,000 is listed in the Wall Street Journal at a price of 100.50.This bond is selling for $1,005.

Shafer Corporation issued callable bonds.The bonds are most likely to be called if

Which of the following statements is most correct?

Leveraged buyouts (LBOs)are used by existing corporate bondholders to increase the rate of return earned on their bonds.

Other things being equal,investors will value which of the following bonds the highest?

John and Karen are both considering buying a corporate bond with a coupon rate of 8%,a face value of $1,000,and a maturity date of January 1,2025.Which of the following statements is most correct?

To determine the periodic interest payments that a bond makes,multiply the bond's stated coupon rate by its par value and divide by the number of coupon payments per year.

The value of a bond is inversely related to changes in the investor's present required rate of return.

Metal Fabricators just issued $1,000 par 20-year bonds.The bonds sold for $758.18 and pay interest semi-annually.Investors require a rate of 9% on the bonds.What is the bonds' coupon rate?

Cabell Corp.bonds pay an annual coupon rate of 10%.If investors' required rate of return is now 12% on these bonds,they will be priced at

The Wall Street Journal bond quotes indicate that the net close for a bond with a $1,000 par value is 100¾.The closing price for that bond was $100.75.

The sum of the present values of an investment's expected future cash flows is known as the investment's intrinsic value.

Liquidation value is of primary importance to investors because it represents the true amount of cash that an investor is likely to receive.