Question 1

An upward-sloping term structure of interest rates indicates that:

Accepted Answer

A) longer-term rates are higher than shorter-term rates. 
B) investors should expect interest rates to decline in the future. 
C) short and intermediate term rates are real rates while long term rates are nominal rates. 
D) the Fed is expected to decrease rates in the near term. 
E) the larger the investment in dollars,the higher the interest rate paid. 
A) longer-term rates are higher than shorter-term rates. 
B) investors should expect interest rates to decline in the future. 
C) short and intermediate term rates are real rates while long term rates are nominal rates. 
D) the Fed is expected to decrease rates in the near term. 
E) the larger the investment in dollars,the higher the interest rate paid.

Question 2

A corporate bond with a face value of $1,000 matures in 4 years and has a coupon rate of 6.25 percent.The current price of the bond is $932 and interest is paid semiannually.What is the yield to maturity?

Accepted Answer

A) 9.05 percent 
B) 6.67 percent 
C) 8.58 percent 
D) 8.28 percent 
E) 7.92 percent 
A) 9.05 percent 
B) 6.67 percent 
C) 8.58 percent 
D) 8.28 percent 
E) 7.92 percent

Question 3

The specified date on which the principal amount of a bond is repaid is called the bond's:

Accepted Answer

A) coupon. 
B) face value. 
C) maturity. 
D) yield to maturity. 
E) coupon rate. 
A) coupon. 
B) face value. 
C) maturity. 
D) yield to maturity. 
E) coupon rate.

Question 4

Mason's has 5-year,8 percent annual coupon bonds outstanding with a par value of $1,000.Dixon's has 10-year,8 percent annual coupon bonds outstanding with a par value of $1,000.Both bonds currently have a yield to maturity of 8 percent.Which one of the following statements is correct if the market rate decreases to 7 percent?

Accepted Answer

A) Both bonds will decrease in value by 4.10 percent. 
B) Mason's bond will increase in value by $52.10. 
C) Dixon's bond will increase in value by 4.61 percent. 
D) Mason's bond will increase in value by $41. 
E) Dixon's bond will increase in value by 6.87 percent. 
A) Both bonds will decrease in value by 4.10 percent. 
B) Mason's bond will increase in value by $52.10. 
C) Dixon's bond will increase in value by 4.61 percent. 
D) Mason's bond will increase in value by $41. 
E) Dixon's bond will increase in value by 6.87 percent.

Question 5

The rate of return required by investors in the market for owning a bond is called the:

Accepted Answer

A) coupon. 
B) face value. 
C) maturity. 
D) yield to maturity. 
E) coupon rate. 
A) coupon. 
B) face value. 
C) maturity. 
D) yield to maturity. 
E) coupon rate.

Question 6

The zero coupon bonds of Mark Enterprises have a market price of $394.47,a face value of $1,000,and a yield to maturity of 6.87 percent based on semiannual compounding.How many years is it until this bond matures?

Accepted Answer

A) 11.08 years 
B) 10.49 years 
C) 13.77 years 
D) 12.64 years 
E) 15.42 years 
A) 11.08 years 
B) 10.49 years 
C) 13.77 years 
D) 12.64 years 
E) 15.42 years

Question 7

The dirty price of a bond is defined as the:

Accepted Answer

A) market price minus any taxes due on the accrued interest. 
B) market price minus the accrued interest. 
C) clean price minus the accrued interest. 
D) quoted price plus the accrued interest. 
E) clean price minus any taxes due on the accrued interest. 
A) market price minus any taxes due on the accrued interest. 
B) market price minus the accrued interest. 
C) clean price minus the accrued interest. 
D) quoted price plus the accrued interest. 
E) clean price minus any taxes due on the accrued interest.

An upward-sloping term structure of interest rates indicates that:

A corporate bond with a face value of $1,000 matures in 4 years and has a coupon rate of 6.25 percent.The current price of the bond is $932 and interest is paid semiannually.What is the yield to maturity?

The specified date on which the principal amount of a bond is repaid is called the bond's:

The rate of return required by investors in the market for owning a bond is called the:

The zero coupon bonds of Mark Enterprises have a market price of $394.47,a face value of $1,000,and a yield to maturity of 6.87 percent based on semiannual compounding.How many years is it until this bond matures?

The dirty price of a bond is defined as the:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

Filters

Exam 8: Interest Rates and Bond Valuation

An upward-sloping term structure of interest rates indicates that:

A corporate bond with a face value of $1,000 matures in 4 years and has a coupon rate of 6.25 percent.The current price of the bond is $932 and interest is paid semiannually.What is the yield to maturity?

The specified date on which the principal amount of a bond is repaid is called the bond's:

The rate of return required by investors in the market for owning a bond is called the:

The zero coupon bonds of Mark Enterprises have a market price of $394.47,a face value of $1,000,and a yield to maturity of 6.87 percent based on semiannual compounding.How many years is it until this bond matures?

The dirty price of a bond is defined as the:

Introduction to Corporate Finance

Financial Statements and Cash Flow

Financial Statements and Cash Flow

Discounted Cash Flow Valuation

Net Present Value and Other Investment Rules

Making Capital Investment Decisions

Risk Analysis, real Options, and Capital Budgeting

Stock Valuation

Lessons From Market History

Return, risk, and the Capital Asset Pricing Model Capm

An Alternative View of Risk and Return: the Arbitrage Pricing Theory

Risk, cost of Capital, and Valuation

Efficient Capital Markets and Behavioral Challenges

Long-Term Financing

Capital Structure: Basic Concepts

Capital Structure: Limits to the Use of Debt

Valuation and Capital Budgeting for the Levered Firm

Dividends and Other Payouts

Raising Capital

Leasing

Options and Corporate Finance

Options and Corporate Finance: Extensions and Applications

Warrants and Convertibles

Derivatives and Hedging Risk

Short-Term Finance and Planning

Cash Management

Credit and Inventory Management

Mergers,acquisitions,and Divestitures

Financial Distress

International Corporate Finance

Filters