Question 1

A risk-free,zero-coupon bond has 15 years to maturity.Which of the following is closest to the price per $100 of face value that the bond will trade at if the YTM is 7%?

Accepted Answer

A) $29.55 
B) $32.68 
C) $36.24 
D) $38.78 
E) $39.41 
A) $29.55 
B) $32.68 
C) $36.24 
D) $38.78 
E) $39.41 C

Question 2

How much will the coupon payments be of a 30-year $10,000 bond with a 4.5% coupon rate and semi-annual payments?

Accepted Answer

A) $30 
B) $225 
C) $350 
D) $450 
E) $45 
A) $30 
B) $225 
C) $350 
D) $450 
E) $45 B

Question 3

Based on Figure 6.5,which of the following is least likely to default?

Accepted Answer

A) Bell Canada Enterprises 
B) Province of British Columbia 
C) Government of Canada 
D) All of the above 
E) None of the above 
A) Bell Canada Enterprises 
B) Province of British Columbia 
C) Government of Canada 
D) All of the above 
E) None of the above C

Question 4

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the bond is currently trading for $459,then the yield to maturity on this bond is closest to:

Accepted Answer

A) 7.5% 
B) 10.4% 
C) 9.7% 
D) 8.1% 
E) 7.2% 
A) 7.5% 
B) 10.4% 
C) 9.7% 
D) 8.1% 
E) 7.2%

Question 5

How much will the coupon payments be of a 10-year $10,000 bond with a 3% coupon rate and semi-annual payments?

Accepted Answer

A) $150 
B) $120 
C) $100 
D) $300 
E) $600 
A) $150 
B) $120 
C) $100 
D) $300 
E) $600

Question 6

Consolidated Insurance wants to raise $35 million in order to build a new headquarters.The company will fund this by issuing 10-year bonds with a face value of $1,000 and a coupon rating of 6.5%,paid semi-annually.The above table shows the yield to maturity for similar 10-year corporate bonds of different ratings.Which of the following is closest to how many more bonds Consolidated Insurance would have to sell to raise this money if their bonds received an A rating rather than an AA rating?

Accepted Answer

A) 686 
B) 750 
C) 765 
D) 1156 
E) 872 
A) 686 
B) 750 
C) 765 
D) 1156 
E) 872

Question 7

A $10,000 bond with a coupon rate of 5% paid semi-annually has five years to maturity and a yield to maturity of 3%.What is the price of this bond?

Accepted Answer

A) $9,771.01 
B) $2,132.55 
C) $7,440.94 
D) $9,573.49 
E) $10,915.94 
A) $9,771.01 
B) $2,132.55 
C) $7,440.94 
D) $9,573.49 
E) $10,915.94

Question 8

What is the coupon rate of a 30-year,$1000 bond with semi-annual payments of $22.50?

Accepted Answer

A) 5% 
B) 2.25% 
C) 4.5% 
D) 2% 
E) 22.5% 
A) 5% 
B) 2.25% 
C) 4.5% 
D) 2% 
E) 22.5%

Question 9

Which of the following bonds will be least sensitive to a change in interest rates?

Accepted Answer

A) a ten-year bond with a $2000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semi-annually 
B) a 15-year bond with a $5000 face value whose yield to maturity is 7.4% and coupon rate is 6.2% APR paid annually 
C) a 20-year bond with a $3000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semi-annually 
D) a 30-year bond with a $1000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually 
E) a 25-year bond with $4000 face value whose yield to maturity is 6.2% and coupon rate is 5.6% APR paid annually 
A) a ten-year bond with a $2000 face value whose yield to maturity is 5.8% and coupon rate is 5.8% APR paid semi-annually 
B) a 15-year bond with a $5000 face value whose yield to maturity is 7.4% and coupon rate is 6.2% APR paid annually 
C) a 20-year bond with a $3000 face value whose yield to maturity is 6.0% and coupon rate is 5.4% APR paid semi-annually 
D) a 30-year bond with a $1000 face value whose yield to maturity is 5.5% and coupon rate is 6.4% APR paid annually 
E) a 25-year bond with $4000 face value whose yield to maturity is 6.2% and coupon rate is 5.6% APR paid annually

Question 10

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 
E) $960 
A) $1045 
B) $691 
C) $1000 
D) $957 
E) $960

Question 11

How much will the coupon payments be of a 20-year $500 bond with a 8% coupon rate and quarterly payments?

Accepted Answer

A) $3.33 
B) $10.00 
C) $20.00 
D) $40.00 
E) $2.00 
A) $3.33 
B) $10.00 
C) $20.00 
D) $40.00 
E) $2.00

Question 12

A $10,000 bond with a coupon rate of 3.1% paid semi-annually has 10 years to maturity and a yield to maturity of 4.8%.If interest rates rise and the yield to maturity increases to 5.8%,what will happen to the price of the bond?

Accepted Answer

A) rise by $357.89 
B) rise by $126.75 
C) rise by $84.78 
D) fall by $444.34 
E) fall by $689.47 
A) rise by $357.89 
B) rise by $126.75 
C) rise by $84.78 
D) fall by $444.34 
E) fall by $689.47

Question 13

What must be the price of a $1000 bond with a 5.8% coupon rate,annual coupons,and 30 years to maturity if YTM is 7.5% APR?

Accepted Answer

A) $114.22 
B) $685.00 
C) $799.22 
D) $1005.26 
E) $184.26 
A) $114.22 
B) $685.00 
C) $799.22 
D) $1005.26 
E) $184.26

Question 14

Use the table for the question(s)below.
Consider the following yields to maturity on various one-year zero-coupon securities:
-  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% 
E) 1.8% 
A) 1.0% 
B) 5.6% 
C) 1.6% 
D) 0.8% 
E) 1.8%

Question 15

Suppose that a zero-coupon bond has a face value of $10,000 and 5 years to maturity.If the YTM is 7.2%,at what price will this bond be traded?

Accepted Answer

A) $7,063.60 
B) $6,965.59 
C) $9,328.58 
D) $7,129.86 
E) $10,000 
A) $7,063.60 
B) $6,965.59 
C) $9,328.58 
D) $7,129.86 
E) $10,000

Question 16

Use the information for the question(s)below.
Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments).The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings:
  
-Assuming that Luther's bonds receive a AA rating,the price of the bonds will be closest to:

Accepted Answer

A) $1021 
B) $1014 
C) $1000 
D) $937 
E) $933 
A) $1021 
B) $1014 
C) $1000 
D) $937 
E) $933

Question 17

Assuming that this bond trades for $1035.44,then what is the YTM for this bond?

Accepted Answer

FV = 1000 PMT = 40 (

Question 18

A firm issues ten-year bonds with a coupon rate of 6.5%,paid semi-annually.The credit spread for this firm's ten-year debt is 0.8%.New ten-year Treasury notes are being issued at par with a coupon rate of 5%.What should the price of the firm's outstanding ten-year bonds be per $100 of face value?

Accepted Answer

A) $97.28 
B) $98.27 
C) $100.86 
D) $105.26 
E) $105.80 
A) $97.28 
B) $98.27 
C) $100.86 
D) $105.26 
E) $105.80

Question 19

Why is the yield of bonds with credit risk higher than that of otherwise identical default-free bonds?

Accepted Answer

Because the yield to maturity is calcula

Question 20

What care,if any,should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

Accepted Answer

A typical coupon bond will have the firs

Exam 6: Bonds

A risk-free,zero-coupon bond has 15 years to maturity.Which of the following is closest to the price per $100 of face value that the bond will trade at if the YTM is 7%?

How much will the coupon payments be of a 30-year $10,000 bond with a 4.5% coupon rate and semi-annual payments?

Based on Figure 6.5,which of the following is least likely to default?

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the bond is currently trading for $459,then the yield to maturity on this bond is closest to:

How much will the coupon payments be of a 10-year $10,000 bond with a 3% coupon rate and semi-annual payments?

A $10,000 bond with a coupon rate of 5% paid semi-annually has five years to maturity and a yield to maturity of 3%.What is the price of this bond?

What is the coupon rate of a 30-year,$1000 bond with semi-annual payments of $22.50?

Which of the following bonds will be least sensitive to a change in interest rates?

Assuming the appropriate YTM on the Sisyphean bond is 7.5%,then the price that this bond trades for will be closest to:

How much will the coupon payments be of a 20-year $500 bond with a 8% coupon rate and quarterly payments?

A $10,000 bond with a coupon rate of 3.1% paid semi-annually has 10 years to maturity and a yield to maturity of 4.8%.If interest rates rise and the yield to maturity increases to 5.8%,what will happen to the price of the bond?

What must be the price of a $1000 bond with a 5.8% coupon rate,annual coupons,and 30 years to maturity if YTM is 7.5% APR?

Use the table for the question(s)below. Consider the following yields to maturity on various one-year zero-coupon securities: - The credit spread of the BBB corporate bond is closest to:

Suppose that a zero-coupon bond has a face value of $10,000 and 5 years to maturity.If the YTM is 7.2%,at what price will this bond be traded?

Assuming that this bond trades for $1035.44,then what is the YTM for this bond?

A firm issues ten-year bonds with a coupon rate of 6.5%,paid semi-annually.The credit spread for this firm's ten-year debt is 0.8%.New ten-year Treasury notes are being issued at par with a coupon rate of 5%.What should the price of the firm's outstanding ten-year bonds be per $100 of face value?

Why is the yield of bonds with credit risk higher than that of otherwise identical default-free bonds?

What care,if any,should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

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