Question 1

Which of the following statements about bonds is true?

Accepted Answer

A) If market interest rates are below a bond's coupon interest rate,then the bond will sell above its par value. 
B) Long-term bonds have less interest rate risk than do short-term bonds. 
C) Bond prices move in the same direction as market interest rates. 
D) As the maturity date of a bond approaches,the market value of a bond will become more volatile. 
E) None of the above. 
A) If market interest rates are below a bond's coupon interest rate,then the bond will sell above its par value. 
B) Long-term bonds have less interest rate risk than do short-term bonds. 
C) Bond prices move in the same direction as market interest rates. 
D) As the maturity date of a bond approaches,the market value of a bond will become more volatile. 
E) None of the above.

Question 2

Which of the following statements about bonds is true?

Accepted Answer

A) As the maturity date of a bond approaches,the market value of a bond will become more volatile. 
B) Long-term bonds have less interest rate risk than do short-term bonds. 
C) Bond prices move in the same direction as market interest rates. 
D) If market interest rates are above a bond's coupon interest rate,then the bond will sell below its par value. 
E) None of the above. 
A) As the maturity date of a bond approaches,the market value of a bond will become more volatile. 
B) Long-term bonds have less interest rate risk than do short-term bonds. 
C) Bond prices move in the same direction as market interest rates. 
D) If market interest rates are above a bond's coupon interest rate,then the bond will sell below its par value. 
E) None of the above.

Question 3

Calculate the value of a bond that is expected to mature in 13 years with a $1,000 face value.The interest coupon rate is 8%,and the required rate of return is 10%.Interest is paid annually.

Accepted Answer

V = PV of interest p

Question 4

Which of the following statements is FALSE?

Accepted Answer

A) A debenture would usually be more risky than a mortgage bond that is issued by the same firm. 
B) A bond will sell at a discount if the prevailing required rate of return is more than the bond's coupon rate. 
C) A short-term bond will fluctuate less in value than a long-term bond if interest rates fluctuate. 
D) Interest rates and bond prices usually move in the same direction. 
A) A debenture would usually be more risky than a mortgage bond that is issued by the same firm. 
B) A bond will sell at a discount if the prevailing required rate of return is more than the bond's coupon rate. 
C) A short-term bond will fluctuate less in value than a long-term bond if interest rates fluctuate. 
D) Interest rates and bond prices usually move in the same direction.

Question 5

The better the bond rating,the lower the rate of return demanded in the capital markets.

Accepted Answer

A) True 
 B)False

Question 6

If current market interest rates rise,what will happen to the value of outstanding bonds?

Accepted Answer

A) It will rise. 
B) It will fall. 
C) It will remain unchanged. 
D) There is no connection between current market interest rates and the value of outstanding bonds. 
A) It will rise. 
B) It will fall. 
C) It will remain unchanged. 
D) There is no connection between current market interest rates and the value of outstanding bonds.

Question 7

Given the following information,determine the market value of EAO Company bonds.

Accepted Answer

p_o = (50 ×

Question 8

Which of the following statements is true?

Accepted Answer

A) A bond that has a rating of AA is considered to be a junk bond. 
B) A bond will sell at a premium if the prevailing required rate of return is less than the bond's coupon rate. 
C) A zero coupon is a bond that is secured by a lien on real property. 
D) The legal document that describes all of the terms and conditions of a bond issue is called a debenture agreement. 
A) A bond that has a rating of AA is considered to be a junk bond. 
B) A bond will sell at a premium if the prevailing required rate of return is less than the bond's coupon rate. 
C) A zero coupon is a bond that is secured by a lien on real property. 
D) The legal document that describes all of the terms and conditions of a bond issue is called a debenture agreement.

Question 9

Which of the following is an advantage of zero coupon bonds?

Accepted Answer

A) Small cash outflow at maturity 
B) Lower yield due to low demand 
C) Ability to deduct annual amortization of discount 
D) Both A and C 
E) All of the above 
A) Small cash outflow at maturity 
B) Lower yield due to low demand 
C) Ability to deduct annual amortization of discount 
D) Both A and C 
E) All of the above

Question 10

When inflation rates go up,bond prices go up as well.

Accepted Answer

A) True 
 B)False

Question 11

Six years ago,Colt,Inc.sold an issue of 30-year,$1,000 par value bonds.The coupon rate of 5.25% is payable annually.Investors presently require a rate of return of 8.375%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Accepted Answer

A) $1,050 
B) $932 
C) $681 
D) $1,111 
A) $1,050 
B) $932 
C) $681 
D) $1,111

Question 12

Shorter-term bonds have greater interest rate risk than do longer-term bonds.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is generally NOT a characteristic of a bond?

Accepted Answer

A) Voting rights 
B) Par value 
C) Claims on assets and income 
D) Indenture 
A) Voting rights 
B) Par value 
C) Claims on assets and income 
D) Indenture

Question 14

A mortgage bond is always secured by a lien on real property.

Accepted Answer

A) True 
 B)False

Question 15

A $1,000 par value 10-year bond with a 10% coupon rate recently sold for $900.The yield to maturity:

Accepted Answer

A) is 10%. 
B) is greater than 10%. 
C) is less than 10%. 
D) cannot be determined. 
A) is 10%. 
B) is greater than 10%. 
C) is less than 10%. 
D) cannot be determined.

Question 16

What is the value of a bond that has a par value of $1,000,a coupon rate of $80 (annually),and matures in 11 years? Assume a required rate of return of 11%,and round your answer to the nearest $10.

Accepted Answer

A) $320 
B) $500 
C) $810 
D) $790 
A) $320 
B) $500 
C) $810 
D) $790

Question 17

What elements determine what the yield to maturity will be for a bond?

Accepted Answer

The starting point is the risk free rate

Question 18

On any given day,a bond can be issued at:

Accepted Answer

A) a discount. 
B) a premium. 
C) par. 
D) all of the above. 
A) a discount. 
B) a premium. 
C) par. 
D) all of the above.

Question 19

The longer the time to maturity,the more sensitive a bond's price to changes in market interest rates.

Accepted Answer

A) True 
 B)False

Question 20

The debenture is the legal agreement between the firm issuing a bond and the bond trustee who represents the bondholders.

Accepted Answer

A) True 
 B)False

Which of the following statements about bonds is true?

Which of the following statements about bonds is true?

Calculate the value of a bond that is expected to mature in 13 years with a $1,000 face value.The interest coupon rate is 8%,and the required rate of return is 10%.Interest is paid annually.

Which of the following statements is FALSE?

The better the bond rating,the lower the rate of return demanded in the capital markets.

If current market interest rates rise,what will happen to the value of outstanding bonds?

Given the following information,determine the market value of EAO Company bonds.

Which of the following statements is true?

Which of the following is an advantage of zero coupon bonds?

When inflation rates go up,bond prices go up as well.

Six years ago,Colt,Inc.sold an issue of 30-year,$1,000 par value bonds.The coupon rate of 5.25% is payable annually.Investors presently require a rate of return of 8.375%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Shorter-term bonds have greater interest rate risk than do longer-term bonds.

Which of the following is generally NOT a characteristic of a bond?

A mortgage bond is always secured by a lien on real property.

A $1,000 par value 10-year bond with a 10% coupon rate recently sold for $900.The yield to maturity:

What is the value of a bond that has a par value of $1,000,a coupon rate of $80 (annually),and matures in 11 years? Assume a required rate of return of 11%,and round your answer to the nearest $10.

What elements determine what the yield to maturity will be for a bond?

On any given day,a bond can be issued at:

The longer the time to maturity,the more sensitive a bond's price to changes in market interest rates.

The debenture is the legal agreement between the firm issuing a bond and the bond trustee who represents the bondholders.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

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Exam 9: Debt Valuation and Interest Rates

Which of the following statements about bonds is true?

Which of the following statements about bonds is true?

Calculate the value of a bond that is expected to mature in 13 years with a $1,000 face value.The interest coupon rate is 8%,and the required rate of return is 10%.Interest is paid annually.

Which of the following statements is FALSE?

The better the bond rating,the lower the rate of return demanded in the capital markets.

If current market interest rates rise,what will happen to the value of outstanding bonds?

Given the following information,determine the market value of EAO Company bonds.

Which of the following statements is true?

Which of the following is an advantage of zero coupon bonds?

When inflation rates go up,bond prices go up as well.

Six years ago,Colt,Inc.sold an issue of 30-year,$1,000 par value bonds.The coupon rate of 5.25% is payable annually.Investors presently require a rate of return of 8.375%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Shorter-term bonds have greater interest rate risk than do longer-term bonds.

Which of the following is generally NOT a characteristic of a bond?

A mortgage bond is always secured by a lien on real property.

A $1,000 par value 10-year bond with a 10% coupon rate recently sold for $900.The yield to maturity:

What is the value of a bond that has a par value of $1,000,a coupon rate of $80 (annually),and matures in 11 years? Assume a required rate of return of 11%,and round your answer to the nearest $10.

What elements determine what the yield to maturity will be for a bond?

On any given day,a bond can be issued at:

The longer the time to maturity,the more sensitive a bond's price to changes in market interest rates.

The debenture is the legal agreement between the firm issuing a bond and the bond trustee who represents the bondholders.

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements, taxes, and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

Working Capital Management

International Business Finance

Corporate Risk Management

Filters