Question 1

If the YTM of these bonds decreases to 7%,which bond's price would be most sensitive to this change in YTM?

Accepted Answer

A) #1 
B) #2 
C) #3 
D) #4 
E) #3 and #4 
A) #1 
B) #2 
C) #3 
D) #4 
E) #3 and #4

Question 2

The yield to maturity for the three year zero-coupon bond is closest to:

Accepted Answer

A) 5.4% 
B) 5.8% 
C) 5.6% 
D) 6.0% 
A) 5.4% 
B) 5.8% 
C) 5.6% 
D) 6.0%

Question 3

Which of the following statements is FALSE?

Accepted Answer

A) Prices of bonds with lower durations are more sensitive to interest rate changes. 
B) When a bond is trading at a discount,the price increase between coupons will exceed the drop when a coupon is paid,so the bond's price will rise and its discount will decline as time passes. 
C) Coupon bonds may trade at a discount,at a premium,or at par. 
D) The sensitivity of a bond's price changes in interest rates is the bond's duration. 
A) Prices of bonds with lower durations are more sensitive to interest rate changes. 
B) When a bond is trading at a discount,the price increase between coupons will exceed the drop when a coupon is paid,so the bond's price will rise and its discount will decline as time passes. 
C) Coupon bonds may trade at a discount,at a premium,or at par. 
D) The sensitivity of a bond's price changes in interest rates is the bond's duration.

Question 4

Consider a zero coupon bond with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:

Accepted Answer

A) $120 
B) -$53 
C) $53 
D) $673 
A) $120 
B) -$53 
C) $53 
D) $673

Question 5

Use the table for the question(s)below.
Consider the following yields to maturity on various one-year zero-coupon securities:  
-The price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a BBB rating is closest to:

Accepted Answer

A) 95.60 
B) 94.16 
C) 95.42 
D) 94.70 
A) 95.60 
B) 94.16 
C) 95.42 
D) 94.70

Question 6

An exception to the key difference between sovereign default and corporate bonds is:

Accepted Answer

A) member states of the U.S. 
B) member states of the EMU. 
C) member states of the African Union. 
D) member states of the NAFTA. 
A) member states of the U.S. 
B) member states of the EMU. 
C) member states of the African Union. 
D) member states of the NAFTA.

Question 7

Which of the following statements is FALSE?

Accepted Answer

A) By convention,practitioners always plot the yield of the most senior issued bonds,termed the on-the-run-bonds. 
B) We can determine the no-arbitrage price of a coupon bond by discounting its cash flows using the zero-coupon yields. 
C) If the zero coupon yield curve is upward sloping,the resulting yield to maturity decreases with the coupon rate of the bond. 
D) The yield to maturity of a coupon bond is a weighted average of the yields on the zero-coupon bonds. 
A) By convention,practitioners always plot the yield of the most senior issued bonds,termed the on-the-run-bonds. 
B) We can determine the no-arbitrage price of a coupon bond by discounting its cash flows using the zero-coupon yields. 
C) If the zero coupon yield curve is upward sloping,the resulting yield to maturity decreases with the coupon rate of the bond. 
D) The yield to maturity of a coupon bond is a weighted average of the yields on the zero-coupon bonds.

Question 8

Use the information for the question(s)below.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years.The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.
-Assuming the appropriate YTM on the Sisyphean bond is 7.5%,then the price that this bond trades for will be closest to:

Accepted Answer

A) $1045 
B) $691 
C) $1000 
D) $957 
A) $1045 
B) $691 
C) $1000 
D) $957

Question 9

A key difference between sovereign default and corporate bonds is:

Accepted Answer

A) unlike a corporation,a country facing difficulty meeting its financial obligations is can not default. 
B) unlike corporate debt,sovereign debt prices are not inverse to yields. 
C) unlike a corporation,any country can turn to the EMU to pay off its debts. 
D) unlike a corporation,a country facing difficulty meeting its financial obligations typically has the option to print more currency. 
A) unlike a corporation,a country facing difficulty meeting its financial obligations is can not default. 
B) unlike corporate debt,sovereign debt prices are not inverse to yields. 
C) unlike a corporation,any country can turn to the EMU to pay off its debts. 
D) unlike a corporation,a country facing difficulty meeting its financial obligations typically has the option to print more currency.

Question 10

A three-month treasury bill sold for a price of $99.311998 per $100 face value.The yield to maturity of this bond expressed as an EAR is closest to:

Accepted Answer

A) 2.5% 
B) 2.8% 
C) 3.2% 
D) 4.0% 
A) 2.5% 
B) 2.8% 
C) 3.2% 
D) 4.0%

Question 11

Consider a zero coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

Accepted Answer

A) 46% 
B) 17% 
C) 22% 
D) 38% 
A) 46% 
B) 17% 
C) 22% 
D) 38%

Question 12

The price today of a 4 year default free security with a face value of $1000 and an annual coupon rate of 5.25% is closest to:

Accepted Answer

A) $1000 
B) $1003 
C) $1008 
D) $987 
A) $1000 
B) $1003 
C) $1008 
D) $987

Question 13

Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons,a coupon rate of 5%,and a face value of $1000.Wyatt Oil believes it can get a AAA rating from Standard and Poor's for this bond issue.What is the difference in the price the company will receive if the rating is BBB instead of AAA?

Accepted Answer

A) $97.17 
B) $130.30 
C) $0 
D) $26.41 
A) $97.17 
B) $130.30 
C) $0 
D) $26.41

Question 14

The forward rate for year 4 (the forward rate quoted today for an investment that begins in three years and matures in four years)is closest to:

Accepted Answer

A) 4.5% 
B) 4.6% 
C) 4.4% 
D) 5.0% 
A) 4.5% 
B) 4.6% 
C) 4.4% 
D) 5.0%

Question 15

Consider a corporate bond with a $1000 face value,10% coupon with semiannual coupon payments,5 years until maturity,currently selling for a cash price of $1113.80.The next coupon payment will be made in 63 days and there are 182 days in the current coupon period.The clean price for this bond is closest to:

Accepted Answer

A) $1146.50 
B) $1065.70 
C) $1113.80 
D) $1081.10 
A) $1146.50 
B) $1065.70 
C) $1113.80 
D) $1081.10

Question 16

The credit spread of the BBB corporate bond is closest to:

Accepted Answer

A) 1.0% 
B) 5.6% 
C) 1.6% 
D) 0.8% 
A) 1.0% 
B) 5.6% 
C) 1.6% 
D) 0.8%

Question 17

The price per $100 face value of a four-year,zero-coupon,risk-free bond is closest to:

Accepted Answer

A) $90.06 
B) $89.16 
C) $86.39 
D) $84.66 
A) $90.06 
B) $89.16 
C) $86.39 
D) $84.66

Question 18

Consider a corporate bond with a $1000 face value,8% coupon with semiannual coupon payments,7 years until maturity,and a YTM of 9%.It has been 57 days since the last coupon payment was made and there are 182 days in the current coupon period.The dirty (cash)price for this bond is closest to:

Accepted Answer

A) $949.70 
B) $961.40 
C) $936.40 
D) $948.90 
A) $949.70 
B) $961.40 
C) $936.40 
D) $948.90

Question 19

Use the table for the question(s)below.
Consider the following four bonds that pay annual coupons:  
-The percentage change in the price of the bond "A" if its yield to maturity increases from 5% to 6% is closest to:

Accepted Answer

A) -4% 
B) -6% 
C) -1% 
D) 4% 
A) -4% 
B) -6% 
C) -1% 
D) 4%

Question 20

Use the information for the question(s)below.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years.The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.
-How much are each of the semiannual coupon payments? Assuming the appropriate YTM on the Sisyphean bond is 8.8%,then at what price should this bond trade for?

Accepted Answer

Coupon = (coupon rate × face v

Exam 6: Valuing Bonds

If the YTM of these bonds decreases to 7%,which bond's price would be most sensitive to this change in YTM?

The yield to maturity for the three year zero-coupon bond is closest to:

Which of the following statements is FALSE?

Consider a zero coupon bond with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:

Use the table for the question(s)below. Consider the following yields to maturity on various one-year zero-coupon securities: -The price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a BBB rating is closest to:

An exception to the key difference between sovereign default and corporate bonds is:

Which of the following statements is FALSE?

A key difference between sovereign default and corporate bonds is:

A three-month treasury bill sold for a price of $99.311998 per $100 face value.The yield to maturity of this bond expressed as an EAR is closest to:

Consider a zero coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

The price today of a 4 year default free security with a face value of $1000 and an annual coupon rate of 5.25% is closest to:

The forward rate for year 4 (the forward rate quoted today for an investment that begins in three years and matures in four years)is closest to:

The credit spread of the BBB corporate bond is closest to:

The price per $100 face value of a four-year,zero-coupon,risk-free bond is closest to:

Consider a corporate bond with a $1000 face value,8% coupon with semiannual coupon payments,7 years until maturity,and a YTM of 9%.It has been 57 days since the last coupon payment was made and there are 182 days in the current coupon period.The dirty (cash)price for this bond is closest to:

Use the table for the question(s)below. Consider the following four bonds that pay annual coupons: -The percentage change in the price of the bond "A" if its yield to maturity increases from 5% to 6% is closest to:

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress,managerial Incentives,and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modeling: a Case Study

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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