Question 1

If current market interest rates fall,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 2

As market interest rates increase,bond prices decrease.

Accepted Answer

A) True 
 B)False

Question 3

What is the expected rate of return on a bond that pays a coupon rate of 9%,has a par value of $1,000,matures in five years,and is currently selling for $714? Round your answer to the nearest whole percent and assume annual coupon payments.

Accepted Answer

A) 18% 
B) 13% 
C) 16% 
D) 17% 
A) 18% 
B) 13% 
C) 16% 
D) 17%

Question 4

What is the value of a bond that matures in three years,has an annual coupon payment of $110,and a par value of $1,000? Assume a required rate of return of 11%,and round your answer to the nearest $10.

Accepted Answer

A) $970 
B) $1,330 
C) $330 
D) $1,000 
A) $970 
B) $1,330 
C) $330 
D) $1,000

Question 5

Miller Motorworks has a $1,000 par value,8% annual coupon bond with interest payable semiannually with a remaining term of 15 years.The annual market yield on similar bonds is 6%.What is the bond selling for today? (Round to the nearest whole dollar. )

Accepted Answer

A) $1,196 
B) $1,042 
C) $1,000 
D) $946 
A) $1,196 
B) $1,042 
C) $1,000 
D) $946

Question 6

Any unsecured long-term debt instrument is a debenture.

Accepted Answer

A) True 
 B)False

Question 7

Generic,Inc.has bonds outstanding that mature in 20 years.The bonds have $1,000 par value,pay interest annually at a rate of 10%,and have a current selling price of $875.25.The yield to maturity on the bonds is:

Accepted Answer

A) 10%. 
B) 8.75%. 
C) 11.63%. 
D) 7.24%. 
A) 10%. 
B) 8.75%. 
C) 11.63%. 
D) 7.24%.

Question 8

You are considering the purchase of Hytec bonds that were issued 14 years ago.When the bonds were originally sold,they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually.The bond is currently selling for $1,508.72.What is the yield to maturity on the bonds?

Accepted Answer

A) 8.50% 
B) 14.38% 
C) 11.11% 
D) 7.67% 
A) 8.50% 
B) 14.38% 
C) 11.11% 
D) 7.67%

Question 9

All of the following affect the value of a bond EXCEPT:

Accepted Answer

A) investors' required rate of return. 
B) the recorded value of the firm's assets. 
C) the coupon rate of interest. 
D) the maturity date of the bond. 
A) investors' required rate of return. 
B) the recorded value of the firm's assets. 
C) the coupon rate of interest. 
D) the maturity date of the bond.

Question 10

The discount rate used to value a bond is:

Accepted Answer

A) the coupon interest rate. 
B) determined by the issuing company. 
C) fixed for the life of the bond. 
D) the market rate of interest. 
A) the coupon interest rate. 
B) determined by the issuing company. 
C) fixed for the life of the bond. 
D) the market rate of interest.

Question 11

Which of the following bonds is sold by a corporation at a discount and pays no interest?

Accepted Answer

A) An indenture bond 
B) A zero coupon bond 
C) A junk bond 
D) A eurobond 
A) An indenture bond 
B) A zero coupon bond 
C) A junk bond 
D) A eurobond

Question 12

Debentures are unsecured long-term debt.

Accepted Answer

A) True 
 B)False

Question 13

Given the anticipated rate of inflation (i)of 6.13% and the real rate of interest (R)of 7.56%,what is the true inflation premium?

Accepted Answer

We know the inflatio

Question 14

Mortgage bonds:

Accepted Answer

A) are a type of debenture. 
B) are secured by a lien on real property. 
C) usually pay little or no interest. 
D) can only be issued by financial institutions. 
A) are a type of debenture. 
B) are secured by a lien on real property. 
C) usually pay little or no interest. 
D) can only be issued by financial institutions.

Question 15

Sterling Corp.bonds pay 10% annual interest and are selling at 97.The market rate of interest:

Accepted Answer

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

Question 16

Bonds that sell at a discount have a coupon rate lower than the market interest rate.

Accepted Answer

A) True 
 B)False

Question 17

When referring to bonds,expected rate of return and yield to maturity are often used interchangeably.

Accepted Answer

A) True 
 B)False

Question 18

The Blackburn Group has recently issued 20-year,unsecured bonds rated BB by Moody's.These bonds are:

Accepted Answer

A) low-risk bonds. 
B) debentures. 
C) premium bonds. 
D) mortgage bonds. 
A) low-risk bonds. 
B) debentures. 
C) premium bonds. 
D) mortgage bonds.

Question 19

A(n)________ is used to outline the issuing company's contractual obligations to bondholders.

Accepted Answer

A) mortgage 
B) debenture 
C) bond rating 
D) indenture 
A) mortgage 
B) debenture 
C) bond rating 
D) indenture

Question 20

Garvin,Inc.'s bonds have a par value of $1,000.The bonds pay semiannual interest of $40 and mature in five years.
a.How much would you pay for Garvin bonds if your required rate of return is 10%?
b.How much would you pay if your required rate of return is 8%?

Accepted Answer

The answer of Garvin,Inc.'s bonds have a par value of...

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

As market interest rates increase,bond prices decrease.

What is the expected rate of return on a bond that pays a coupon rate of 9%,has a par value of $1,000,matures in five years,and is currently selling for $714? Round your answer to the nearest whole percent and assume annual coupon payments.

What is the value of a bond that matures in three years,has an annual coupon payment of $110,and a par value of $1,000? Assume a required rate of return of 11%,and round your answer to the nearest $10.

Miller Motorworks has a $1,000 par value,8% annual coupon bond with interest payable semiannually with a remaining term of 15 years.The annual market yield on similar bonds is 6%.What is the bond selling for today? (Round to the nearest whole dollar. )

Any unsecured long-term debt instrument is a debenture.

Generic,Inc.has bonds outstanding that mature in 20 years.The bonds have $1,000 par value,pay interest annually at a rate of 10%,and have a current selling price of $875.25.The yield to maturity on the bonds is:

You are considering the purchase of Hytec bonds that were issued 14 years ago.When the bonds were originally sold,they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually.The bond is currently selling for $1,508.72.What is the yield to maturity on the bonds?

All of the following affect the value of a bond EXCEPT:

The discount rate used to value a bond is:

Which of the following bonds is sold by a corporation at a discount and pays no interest?

Debentures are unsecured long-term debt.

Given the anticipated rate of inflation (i)of 6.13% and the real rate of interest (R)of 7.56%,what is the true inflation premium?

Mortgage bonds:

Sterling Corp.bonds pay 10% annual interest and are selling at 97.The market rate of interest:

Bonds that sell at a discount have a coupon rate lower than the market interest rate.

When referring to bonds,expected rate of return and yield to maturity are often used interchangeably.

The Blackburn Group has recently issued 20-year,unsecured bonds rated BB by Moody's.These bonds are:

A(n)________ is used to outline the issuing company's contractual obligations to bondholders.

Garvin,Inc.'s bonds have a par value of $1,000.The bonds pay semiannual interest of $40 and mature in five years. a.How much would you pay for Garvin bonds if your required rate of return is 10%? b.How much would you pay if your required rate of return is 8%?

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

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

As market interest rates increase,bond prices decrease.

What is the expected rate of return on a bond that pays a coupon rate of 9%,has a par value of $1,000,matures in five years,and is currently selling for $714? Round your answer to the nearest whole percent and assume annual coupon payments.

What is the value of a bond that matures in three years,has an annual coupon payment of $110,and a par value of $1,000? Assume a required rate of return of 11%,and round your answer to the nearest $10.

Miller Motorworks has a $1,000 par value,8% annual coupon bond with interest payable semiannually with a remaining term of 15 years.The annual market yield on similar bonds is 6%.What is the bond selling for today? (Round to the nearest whole dollar. )

Any unsecured long-term debt instrument is a debenture.

Generic,Inc.has bonds outstanding that mature in 20 years.The bonds have $1,000 par value,pay interest annually at a rate of 10%,and have a current selling price of $875.25.The yield to maturity on the bonds is:

You are considering the purchase of Hytec bonds that were issued 14 years ago.When the bonds were originally sold,they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually.The bond is currently selling for $1,508.72.What is the yield to maturity on the bonds?

All of the following affect the value of a bond EXCEPT:

The discount rate used to value a bond is:

Which of the following bonds is sold by a corporation at a discount and pays no interest?

Debentures are unsecured long-term debt.

Given the anticipated rate of inflation (i)of 6.13% and the real rate of interest (R)of 7.56%,what is the true inflation premium?

Mortgage bonds:

Sterling Corp.bonds pay 10% annual interest and are selling at 97.The market rate of interest:

Bonds that sell at a discount have a coupon rate lower than the market interest rate.

When referring to bonds,expected rate of return and yield to maturity are often used interchangeably.

The Blackburn Group has recently issued 20-year,unsecured bonds rated BB by Moody's.These bonds are:

A(n)________ is used to outline the issuing company's contractual obligations to bondholders.

Garvin,Inc.'s bonds have a par value of $1,000.The bonds pay semiannual interest of $40 and mature in five years. a.How much would you pay for Garvin bonds if your required rate of return is 10%? b.How much would you pay if your required rate of return is 8%?

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