Question 1

Use the following information to answer the question(s)below.  
-The credit spread on AAA-rated corporate bonds is:

Accepted Answer

A) 1.0% 
B) 1.5% 
C) 2.6% 
D) 4.1% 
A) 1.0% 
B) 1.5% 
C) 2.6% 
D) 4.1%

Question 2

Use the following information to answer the question(s)below.  
-The price today of a two-year default-free security with a face value of $1000 and an annual coupon rate of 5% is closest to:

Accepted Answer

A) $1002.78 
B) $1003.31 
C) $1028.50 
D) $1028.61 
A) $1002.78 
B) $1003.31 
C) $1028.50 
D) $1028.61

Question 3

Use the following information to answer the question(s)below.
Suppose the current zero-coupon yield curve for risk-free bonds is as follows:  
-The price per $100 face value of a three-year,zero-coupon,risk-free bond is closest to:

Accepted Answer

A) $93.80 
B) $90.06 
C) $89.16 
D) $86.39 
A) $93.80 
B) $90.06 
C) $89.16 
D) $86.39

Question 4

Use the table for the question(s)below.
Consider the following zero-coupon yields on default free securities:  
-The price today of a 3 year default free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

Accepted Answer

A) $1000 
B) $1021 
C) $1013 
D) $1005 
A) $1000 
B) $1021 
C) $1013 
D) $1005

Question 5

Which of the following statements is FALSE?

Accepted Answer

A) Bond traders typically quote bond prices rather than bond yields . 
B) Treasury bills are zero-coupon bonds. 
C) Zero-coupon bonds always trade at a discount. 
D) The yield to maturity is typically stated as an annual rate by multiplying the calculated YTM by the number of coupon payment per year,thereby converting it to an APR. 
A) Bond traders typically quote bond prices rather than bond yields . 
B) Treasury bills are zero-coupon bonds. 
C) Zero-coupon bonds always trade at a discount. 
D) The yield to maturity is typically stated as an annual rate by multiplying the calculated YTM by the number of coupon payment per year,thereby converting it to an APR.

Question 6

If a bond is currently trading at its face (par)value,then it must be the case that:

Accepted Answer

A) the bond's yield to maturity is less than its coupon rate. 
B) the bond's yield to maturity is equal to its coupon rate. 
C) the bond's yield to maturity is greater than its coupon rate. 
D) the bond is a zero-coupon bond. 
A) the bond's yield to maturity is less than its coupon rate. 
B) the bond's yield to maturity is equal to its coupon rate. 
C) the bond's yield to maturity is greater than its coupon rate. 
D) the bond is a zero-coupon bond.

Question 7

Which of the following statements is FALSE?

Accepted Answer

A) The principal or face value of a bond is the notional amount we use to compute the interest payments. 
B) Payments are made on bonds until a final repayment date,called the term date of the bond. 
C) The coupon rate of a bond is set by the issuer and stated on the bond certificate. 
D) The promised interest payments of a bond are called coupons. 
A) The principal or face value of a bond is the notional amount we use to compute the interest payments. 
B) Payments are made on bonds until a final repayment date,called the term date of the bond. 
C) The coupon rate of a bond is set by the issuer and stated on the bond certificate. 
D) The promised interest payments of a bond are called coupons.

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 9%,then this bond will trade at

Accepted Answer

A) a premium. 
B) a discount. 
C) par. 
D) None of the above 
A) a premium. 
B) a discount. 
C) par. 
D) None of the above

Question 9

Which of the following statements is FALSE?

Accepted Answer

A) When a bond is trading at a discount,the price drop when a coupon is paid will be larger than the price increase between coupons,so the bond's discount will tend to decline as time passes. 
B) When a bond trades at a price equal to its face value,it is said to trade at par. 
C) As interest rates and bond yield rise,bond prices will fall. 
D) Ultimately,the prices of all bonds approach the bond's face value when the bonds mature and their last coupon is paid. 
A) When a bond is trading at a discount,the price drop when a coupon is paid will be larger than the price increase between coupons,so the bond's discount will tend to decline as time passes. 
B) When a bond trades at a price equal to its face value,it is said to trade at par. 
C) As interest rates and bond yield rise,bond prices will fall. 
D) Ultimately,the prices of all bonds approach the bond's face value when the bonds mature and their last coupon is paid.

Question 10

Consider a four-year,default-free bond with an annual coupon rate of 4.5% and a face value of $1000.The YTM on this bond is closest to:

Accepted Answer

A) 3.85% 
B) 4.20% 
C) 4.35% 
D) 4.40% 
A) 3.85% 
B) 4.20% 
C) 4.35% 
D) 4.40%

Question 11

Based upon the information provided in the table above,you can conclude

Accepted Answer

A) that the yield curve is flat. 
B) nothing about the shape of the yield curve. 
C) that the yield curve is downward sloping. 
D) that the yield curve is upward sloping. 
A) that the yield curve is flat. 
B) nothing about the shape of the yield curve. 
C) that the yield curve is downward sloping. 
D) that the yield curve is upward sloping.

Question 12

Which of the following statements is FALSE?

Accepted Answer

A) Investors pay less for bonds with credit risk than they would for otherwise identical default-free bonds. 
B) Credit spreads fluctuate as perceptions regarding the probability of default change. 
C) Credit spreads are high for bonds with high ratings. 
D) We refer to the difference between the yields of the corporate bonds and the Treasury yields as the default spread or credit spread. 
A) Investors pay less for bonds with credit risk than they would for otherwise identical default-free bonds. 
B) Credit spreads fluctuate as perceptions regarding the probability of default change. 
C) Credit spreads are high for bonds with high ratings. 
D) We refer to the difference between the yields of the corporate bonds and the Treasury yields as the default spread or credit spread.

Question 13

Which of the following statements is FALSE?

Accepted Answer

A) Bond prices converge to the bond's face value due to the time effect,but simultaneously move up and down due to unpredictable changes in bond yields. 
B) As interest rates and bond yields fall,bond prices will rise. 
C) Bonds with higher coupon rates are more sensitive to interest rate changes. 
D) Shorter maturity zero coupon bonds are less sensitive to changes in interest rates than are longer-term zero coupon bonds. 
A) Bond prices converge to the bond's face value due to the time effect,but simultaneously move up and down due to unpredictable changes in bond yields. 
B) As interest rates and bond yields fall,bond prices will rise. 
C) Bonds with higher coupon rates are more sensitive to interest rate changes. 
D) Shorter maturity zero coupon bonds are less sensitive to changes in interest rates than are longer-term zero coupon bonds.

Question 14

Which of the following statements is FALSE?

Accepted Answer

A) Bond ratings encourage widespread investor participation and relatively liquid markets. 
B) Bonds in the top four categories are often referred to as investment grade bonds. 
C) A bond's rating depends on the risk of bankruptcy as well as the bondholder's ability to lay claim to the firm's assets in the event of a bankruptcy. 
D) Debt issues with a low-priority claim in bankruptcy will have a better rating than issues from the same company that have a higher priority in bankruptcy. 
A) Bond ratings encourage widespread investor participation and relatively liquid markets. 
B) Bonds in the top four categories are often referred to as investment grade bonds. 
C) A bond's rating depends on the risk of bankruptcy as well as the bondholder's ability to lay claim to the firm's assets in the event of a bankruptcy. 
D) Debt issues with a low-priority claim in bankruptcy will have a better rating than issues from the same company that have a higher priority in bankruptcy.

Question 15

Sovereign debt is:

Accepted Answer

A) debt issued by national governments. 
B) debt denominated in sovereigns. 
C) always riskless. 
D) debt issued by Greece. 
A) debt issued by national governments. 
B) debt denominated in sovereigns. 
C) always riskless. 
D) debt issued by Greece.

Question 16

Suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%.This bond's coupon rate is closest to:

Accepted Answer

A) 3.5% 
B) 6.0% 
C) 7.0% 
D) 8.0% 
A) 3.5% 
B) 6.0% 
C) 7.0% 
D) 8.0%

Question 17

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 that this bond trades for $1112,then the YTM for this bond is closest to:

Accepted Answer

A) 8.0% 
B) 3.4% 
C) 6.8% 
D) 9.2% 
A) 8.0% 
B) 3.4% 
C) 6.8% 
D) 9.2%

Question 18

Forward interest rates:

Accepted Answer

A) accurately predict future spots rates because of the law of one price. 
B) tend not to be good predictors of future spot rates. 
C) tend to be biased downward as predictors of future spot rates when the yield curve is upward sloping. 
D) tend to be biased upward as predictors of future spot rates when the yield curve is downward sloping. 
A) accurately predict future spots rates because of the law of one price. 
B) tend not to be good predictors of future spot rates. 
C) tend to be biased downward as predictors of future spot rates when the yield curve is upward sloping. 
D) tend to be biased upward as predictors of future spot rates when the yield curve is downward sloping.

Question 19

Consider a zero coupon bond with 20 years to maturity.The price will this bond trade if the YTM is 6% is closest to:

Accepted Answer

A) $215 
B) $312 
C) $335 
D) $306 
A) $215 
B) $312 
C) $335 
D) $306

Question 20

The credit spread on B-rated corporate bonds is:

Accepted Answer

A) 1.0% 
B) 1.5% 
C) 2.6% 
D) 4.1% 
A) 1.0% 
B) 1.5% 
C) 2.6% 
D) 4.1%

Exam 6: Valuing Bonds

Use the following information to answer the question(s)below. -The credit spread on AAA-rated corporate bonds is:

Use the following information to answer the question(s)below. -The price today of a two-year default-free security with a face value of $1000 and an annual coupon rate of 5% is closest to:

Use the following information to answer the question(s)below. Suppose the current zero-coupon yield curve for risk-free bonds is as follows: -The price per $100 face value of a three-year,zero-coupon,risk-free bond is closest to:

Use the table for the question(s)below. Consider the following zero-coupon yields on default free securities: -The price today of a 3 year default free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

Which of the following statements is FALSE?

If a bond is currently trading at its face (par)value,then it must be the case that:

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Consider a four-year,default-free bond with an annual coupon rate of 4.5% and a face value of $1000.The YTM on this bond is closest to:

Based upon the information provided in the table above,you can conclude

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Which of the following statements is FALSE?

Sovereign debt is:

Suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%.This bond's coupon rate is closest to:

Forward interest rates:

Consider a zero coupon bond with 20 years to maturity.The price will this bond trade if the YTM is 6% is closest to:

The credit spread on B-rated corporate bonds is:

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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