Question 1

A 5.125 percent TIPS has an original reference CPI of 191.8.If the current CPI is 188.3,what is the par value of the TIPS?

Accepted Answer

A) $981.75 
B) $1,018.60 
C) $992.75 
D) $1,042.95 
A) $981.75 
B) $1,018.60 
C) $992.75 
D) $1,042.95

Question 2

If a bond is selling at par value,which of the following statements is correct?

Accepted Answer

A) The current yield must equal the coupon rate. 
B) The current yield must equal the yield to maturity. 
C) Both of these statements are correct. 
D) None of these statements is correct. 
A) The current yield must equal the coupon rate. 
B) The current yield must equal the yield to maturity. 
C) Both of these statements are correct. 
D) None of these statements is correct.

Question 3

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent.(Assume semi-annual compounding and $1,000 par value.)

Accepted Answer

A) $553.68 
B) $558.66 
C) $940.00 
D) $1,000.00 
A) $553.68 
B) $558.66 
C) $940.00 
D) $1,000.00

Question 4

Which of the following would NOT be an example of an agency bond?

Accepted Answer

A) Federal Home Loan Bank bond 
B) Student Loan Marketing Association bond 
C) Fannie Mae bond 
D) Treasury bills 
A) Federal Home Loan Bank bond 
B) Student Loan Marketing Association bond 
C) Fannie Mae bond 
D) Treasury bills

Question 5

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in five years if the market interest rate is 7.50 percent.(Assume semi-annual compounding and $1,000 par value.)

Accepted Answer

A) $692.02 
B) $696.57 
C) $962.50 
D) $1,000.00 
A) $692.02 
B) $696.57 
C) $962.50 
D) $1,000.00

Question 6

What does a call provision allow the issuer to do,and why would they do it?

Accepted Answer

A call provision on a bond issue allows

Question 7

Provide the definitions of a discount bond and a premium bond.Give examples.

Accepted Answer

A discount bond is simply a bond that is

Question 8

An 8 percent coupon bond with 15 years to maturity is priced to offer a 9 percent yield to maturity.You believe that in one year,the yield to maturity will be 6.5 percent.What is the change in price the bond will experience in dollars? (Assume annual interest payments and par value is $1,000.)

Accepted Answer

A) $163.92 
B) $176.15 
C) $198.45 
D) $215.82 
A) $163.92 
B) $176.15 
C) $198.45 
D) $215.82

Question 9

Which of the following is NOT true about EE savings bonds?

Accepted Answer

A) Interest payments are received annually but are tax deductible. 
B) About one in six Americans own a savings bond. 
C) These are tax deferred investments. 
D) Patriot bonds sell for one-half of their face value. 
A) Interest payments are received annually but are tax deductible. 
B) About one in six Americans own a savings bond. 
C) These are tax deferred investments. 
D) Patriot bonds sell for one-half of their face value.

Question 10

A 7.5 percent coupon bond with 16 years left to maturity is offered for sale at $834.92.What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1,000.)

Accepted Answer

A) 4.77 percent 
B) 7.5 percent 
C) 9.54 percent 
D) 10.34 percent 
A) 4.77 percent 
B) 7.5 percent 
C) 9.54 percent 
D) 10.34 percent

Question 11

Interest Payments Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually),4.75 percent coupon Treasury note,and a corporate zero coupon bond maturing in 15 years.(Assume a $1,000 par value.)

Accepted Answer

A) $4.00, $4.75, $0, respectively 
B) $20.00, $23.75, $0, respectively 
C) $20.00, $23.75, $150, respectively 
D) $40.00, $47.50, $0, respectively 
A) $4.00, $4.75, $0, respectively 
B) $20.00, $23.75, $0, respectively 
C) $20.00, $23.75, $150, respectively 
D) $40.00, $47.50, $0, respectively

Question 12

What actions taken by the Federal Reserve preceded and possibly helped precipitate the recent financial crisis?

Accepted Answer

From 2000 to early 2004,the Federal Rese

Question 13

Which of the following statements is correct?

Accepted Answer

A) There is an inverse relationship between bond prices and bond yields. 
B) There is a positive relationship between bond prices and bond yields. 
C) There is no relationship between bond prices and bond yields. 
D) The relationship between bond prices and bond yields is dependent on the market interest rate. 
A) There is an inverse relationship between bond prices and bond yields. 
B) There is a positive relationship between bond prices and bond yields. 
C) There is no relationship between bond prices and bond yields. 
D) The relationship between bond prices and bond yields is dependent on the market interest rate.

Question 14

Which of the following is a true statement?

Accepted Answer

A) If interest rates fall, U.S.Treasury bonds will have decreasing values. 
B) If interest rates fall, corporate bonds will have decreasing values. 
C) If interest rates fall, no bonds will enjoy rising values. 
D) If interest rates fall, all bonds will enjoy rising values. 
A) If interest rates fall, U.S.Treasury bonds will have decreasing values. 
B) If interest rates fall, corporate bonds will have decreasing values. 
C) If interest rates fall, no bonds will enjoy rising values. 
D) If interest rates fall, all bonds will enjoy rising values.

Question 15

Which of the following statements is correct?

Accepted Answer

A) Yield spreads between bonds of different quality remain static over time. 
B) Yield spreads are set by the Securities Exchange Commission. 
C) Yield spreads between bonds of different quality change over time. 
D) None of these statements is correct. 
A) Yield spreads between bonds of different quality remain static over time. 
B) Yield spreads are set by the Securities Exchange Commission. 
C) Yield spreads between bonds of different quality change over time. 
D) None of these statements is correct.

Question 16

Bond Ratings and Prices A corporate bond with a 5.75 percent coupon has 10 years left to maturity.It has had a credit rating of BBB and a yield to maturity of 6.25 percent.The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BB.The new appropriate discount rate will be 6.75 percent.What will be the change in the bond's price in dollars and percentage terms? (Assume interest payments are paid semi-annually and a par value of $1,000.)

Accepted Answer

Compute the current bond price:
N = 20,I

Question 17

Yields of a Bond A 3.25 percent coupon municipal bond has 12 years left to maturity and has a price quote of 98.75.The bond can be called in five years.The call premium is one year of coupon payments.What is the bond's taxable equivalent yield for an investor in the 35 percent marginal tax bracket? (Assume interest payments are paid semi-annually and a par value of $5,000.)

Accepted Answer

A) 3.38 percent 
B) 5.00 percent 
C) 5.20 percent 
D) 10.12 percent 
A) 3.38 percent 
B) 5.00 percent 
C) 5.20 percent 
D) 10.12 percent

Question 18

Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

Accepted Answer

A) Credit quality risk 
B) Interest rate risk 
C) Liquidity of interest rate risk 
D) Term structure of interest rates 
A) Credit quality risk 
B) Interest rate risk 
C) Liquidity of interest rate risk 
D) Term structure of interest rates

Question 19

Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?

Accepted Answer

A) Debenture 
B) Enforcement codes 
C) Indenture 
D) Prospectus 
A) Debenture 
B) Enforcement codes 
C) Indenture 
D) Prospectus

Question 20

Explain how investors can assess bond market performance.

Accepted Answer

Investors can follow the bond market thr

A 5.125 percent TIPS has an original reference CPI of 191.8.If the current CPI is 188.3,what is the par value of the TIPS?

If a bond is selling at par value,which of the following statements is correct?

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent.(Assume semi-annual compounding and $1,000 par value.)

Which of the following would NOT be an example of an agency bond?

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in five years if the market interest rate is 7.50 percent.(Assume semi-annual compounding and $1,000 par value.)

What does a call provision allow the issuer to do,and why would they do it?

Provide the definitions of a discount bond and a premium bond.Give examples.

An 8 percent coupon bond with 15 years to maturity is priced to offer a 9 percent yield to maturity.You believe that in one year,the yield to maturity will be 6.5 percent.What is the change in price the bond will experience in dollars? (Assume annual interest payments and par value is $1,000.)

Which of the following is NOT true about EE savings bonds?

A 7.5 percent coupon bond with 16 years left to maturity is offered for sale at $834.92.What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1,000.)

Interest Payments Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually),4.75 percent coupon Treasury note,and a corporate zero coupon bond maturing in 15 years.(Assume a $1,000 par value.)

What actions taken by the Federal Reserve preceded and possibly helped precipitate the recent financial crisis?

Which of the following statements is correct?

Which of the following is a true statement?

Which of the following statements is correct?

Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?

Explain how investors can assess bond market performance.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 7: Valuing Bonds

A 5.125 percent TIPS has an original reference CPI of 191.8.If the current CPI is 188.3,what is the par value of the TIPS?

If a bond is selling at par value,which of the following statements is correct?

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent.(Assume semi-annual compounding and $1,000 par value.)

Which of the following would NOT be an example of an agency bond?

Zero Coupon Bond Price Calculate the price of a zero coupon bond that matures in five years if the market interest rate is 7.50 percent.(Assume semi-annual compounding and $1,000 par value.)

What does a call provision allow the issuer to do,and why would they do it?

Provide the definitions of a discount bond and a premium bond.Give examples.

An 8 percent coupon bond with 15 years to maturity is priced to offer a 9 percent yield to maturity.You believe that in one year,the yield to maturity will be 6.5 percent.What is the change in price the bond will experience in dollars? (Assume annual interest payments and par value is $1,000.)

Which of the following is NOT true about EE savings bonds?

A 7.5 percent coupon bond with 16 years left to maturity is offered for sale at $834.92.What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1,000.)

Interest Payments Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually),4.75 percent coupon Treasury note,and a corporate zero coupon bond maturing in 15 years.(Assume a $1,000 par value.)

What actions taken by the Federal Reserve preceded and possibly helped precipitate the recent financial crisis?

Which of the following statements is correct?

Which of the following is a true statement?

Which of the following statements is correct?

Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?

Explain how investors can assess bond market performance.

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Working Capital and Policies

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters