Question 1

How much will each semi-annual coupon payment be?

Accepted Answer

A) $60 
B) $40 
C) $120 
D) $80 
E) $100 
A) $60 
B) $40 
C) $120 
D) $80 
E) $100

Question 2

Using the information in the above table,which bond trades at the greatest premium to par value if the interest rate is 3.5%?

Accepted Answer

A) Bond A 
B) Bond B 
C) Bond C 
D) Bond D 
E) Bond E 
A) Bond A 
B) Bond B 
C) Bond C 
D) Bond D 
E) Bond E

Question 3

What must be the price of a $10,000 bond with a 6.5% coupon rate,semi-annual coupons,and two years to maturity if it has a yield to maturity of 8% APR?

Accepted Answer

A) $9727.76 
B) $9819.74 
C) $10,619.63 
D) $10,754.44 
E) $8816.59 
A) $9727.76 
B) $9819.74 
C) $10,619.63 
D) $10,754.44 
E) $8816.59

Question 4

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 AAA rating,the number of bonds that Luther must issue to raise the needed $25 million is closest to:

Accepted Answer

A) 24,655 
B) 25,000 
C) 24,477 
D) 26,681 
E) 25,114 
A) 24,655 
B) 25,000 
C) 24,477 
D) 26,681 
E) 25,114

Question 5

Why do bond prices fall as interest rates rise?

Accepted Answer

When interest rates increase i

Question 6

Consider a zero-coupon bond with $1,000 face value and 20 years to maturity.The price at which this bond will trade if the YTM is 6% is closest to:

Accepted Answer

A) $215 
B) $312 
C) $335 
D) $306 
E) $402 
A) $215 
B) $312 
C) $335 
D) $306 
E) $402

Question 7

The yields to maturity on a number of one-year,zero-coupon securities are shown in the table above.What is the price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a B rating?

Accepted Answer

A) 94.33% 
B) 95.06% 
C) 95.88% 
D) 96.06% 
E) 100% 
A) 94.33% 
B) 95.06% 
C) 95.88% 
D) 96.06% 
E) 100%

Question 8

Bond traders generally quote bond yields rather than bond prices,since yield to maturity depends on the face value of the bond.

Accepted Answer

A) True 
 B)False

Question 9

A mining company needs to raise $100 million in order to begin open pit mining of a coal seam.The company will fund this by issuing 30-year bonds with a face value of $1000 and a coupon rating of 6%,paid annually.The above table shows the yield to maturity for similar 30-year corporate bonds of different ratings.If the mining company's bonds receive a A rating,what will be their selling price?

Accepted Answer

A) $947.22 
B) $967.64 
C) $1013.91 
D) $1016.41 
E) $875.91 
A) $947.22 
B) $967.64 
C) $1013.91 
D) $1016.41 
E) $875.91

Question 10

The above table shows the price per $100 face value of several risk-free,zero-coupon bonds.What is the yield to maturity of the three-year,zero-coupon,risk-free bond shown?

Accepted Answer

A) 2.83% 
B) 2.85% 
C) 2.86% 
D) 2.88% 
E) 2.70% 
A) 2.83% 
B) 2.85% 
C) 2.86% 
D) 2.88% 
E) 2.70%

Question 11

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond is closest to:

Accepted Answer

A) $1000 
B) $602 
C) $1040 
D) $372 
E) $906 
A) $1000 
B) $602 
C) $1040 
D) $372 
E) $906

Question 12

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 
E) 95.10 
A) 95.60 
B) 94.16 
C) 95.42 
D) 94.70 
E) 95.10

Question 13

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 number of bonds that Luther must issue to raise the needed $25 million is closest to:

Accepted Answer

A) 24,655 
B) 25,000 
C) 24,477 
D) 26,681 
E) 25,114 
A) 24,655 
B) 25,000 
C) 24,477 
D) 26,681 
E) 25,114

Question 14

A $5000 bond with a coupon rate of 6.4% paid semi-annually has four years to maturity and a yield to maturity of 6.2%.If interest rates fall and the yield to maturity decreases by 0.8%,what will happen to the price of the bond?

Accepted Answer

A) fall by $98.64 
B) fall by $40.49 
C) rise by $84.46 
D) rise by $142.78 
E) The price of the bond will not change. 
A) fall by $98.64 
B) fall by $40.49 
C) rise by $84.46 
D) rise by $142.78 
E) The price of the bond will not change.

Question 15

Assuming that this bond trades for $903,then the YTM for this bond is closest to:

Accepted Answer

A) 8.0% 
B) 6.8% 
C) 9.9% 
D) 9.2% 
E) 10.7% 
A) 8.0% 
B) 6.8% 
C) 9.9% 
D) 9.2% 
E) 10.7%

Question 16

Lloyd Industries raised $28 million in order to upgrade its roller kiln furnace for the production of ceramic tile.The company funded this by issuing 15-year bonds with a face value of $1000 and a coupon rating of 6.2%,paid annually.The above table shows the yield to maturity for similar 15-year corporate bonds of different ratings issued at the same time.When Lloyd Industries issued their bonds,they received a price of $962.63.Which of the following is most likely to be the rating these bonds received?

Accepted Answer

A) AA 
B) A 
C) BBB 
D) BB 
E) AAA 
A) AA 
B) A 
C) BBB 
D) BB 
E) AAA

Question 17

Why are the interest rates of Government of Canada notes less than the interest rates of equivalent corporate bonds?

Accepted Answer

A) The Canadian government has a high credit spread. 
B) There is significant risk that the Canadian government will default. 
C) Canadian government securities are widely regarded to be risk-free. 
D) Canadian government securities are generally used to determine interest rates. 
E) Canadian government securities have a larger supply and thus a lower price. 
A) The Canadian government has a high credit spread. 
B) There is significant risk that the Canadian government will default. 
C) Canadian government securities are widely regarded to be risk-free. 
D) Canadian government securities are generally used to determine interest rates. 
E) Canadian government securities have a larger supply and thus a lower price.

Question 18

A coupon bond with a face value of $25,000 and quarterly coupon payments has five years to maturity and a yield to maturity of 5%.If the current price is $10,980,what is the coupon rate?

Accepted Answer

A) 2% 
B) 4.39% 
C) 0.5% 
D) 0% 
E) 5% 
A) 2% 
B) 4.39% 
C) 0.5% 
D) 0% 
E) 5%

Question 19

How are the cash flows of a zero-coupon bond different from those of a coupon bond?

Accepted Answer

A zero-coupon bond has only two cash flo

Question 20

What is the yield to maturity of a five-year,$5000 bond with a 4.5% coupon rate and semi-annual coupons if this bond is currently trading for a price of $4876?

Accepted Answer

A) 4.30% 
B) 5.07% 
C) 6.30% 
D) 8.60% 
E) 4.50% 
A) 4.30% 
B) 5.07% 
C) 6.30% 
D) 8.60% 
E) 4.50%

Exam 6: Bonds

How much will each semi-annual coupon payment be?

Using the information in the above table,which bond trades at the greatest premium to par value if the interest rate is 3.5%?

What must be the price of a $10,000 bond with a 6.5% coupon rate,semi-annual coupons,and two years to maturity if it has a yield to maturity of 8% APR?

Why do bond prices fall as interest rates rise?

Consider a zero-coupon bond with $1,000 face value and 20 years to maturity.The price at which this bond will trade if the YTM is 6% is closest to:

The yields to maturity on a number of one-year,zero-coupon securities are shown in the table above.What is the price (expressed as a percentage of the face value)of a one-year,zero-coupon corporate bond with a B rating?

Bond traders generally quote bond yields rather than bond prices,since yield to maturity depends on the face value of the bond.

The above table shows the price per $100 face value of several risk-free,zero-coupon bonds.What is the yield to maturity of the three-year,zero-coupon,risk-free bond shown?

Consider a zero-coupon bond with a $1000 face value and ten years left until maturity.If the YTM of this bond is 10.4%,then the price of this bond 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:

A $5000 bond with a coupon rate of 6.4% paid semi-annually has four years to maturity and a yield to maturity of 6.2%.If interest rates fall and the yield to maturity decreases by 0.8%,what will happen to the price of the bond?

Assuming that this bond trades for $903,then the YTM for this bond is closest to:

Why are the interest rates of Government of Canada notes less than the interest rates of equivalent corporate bonds?

A coupon bond with a face value of $25,000 and quarterly coupon payments has five years to maturity and a yield to maturity of 5%.If the current price is $10,980,what is the coupon rate?

How are the cash flows of a zero-coupon bond different from those of a coupon bond?

What is the yield to maturity of a five-year,$5000 bond with a 4.5% coupon rate and semi-annual coupons if this bond is currently trading for a price of $4876?

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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