Question 1

If the market price of a bond increases,then:

Accepted Answer

A) the yield to maturity decreases. 
B) the coupon rate increases. 
C) the yield to maturity increases. 
D) none of the above. 
A) the yield to maturity decreases. 
B) the coupon rate increases. 
C) the yield to maturity increases. 
D) none of the above.

Question 2

Eurobonds are:

Accepted Answer

A) issued in a country different from the one in whose currency the bond is denominated. 
B) issued only in Europe. 
C) the European equivalent of a junk bond. 
D) none of the above. 
A) issued in a country different from the one in whose currency the bond is denominated. 
B) issued only in Europe. 
C) the European equivalent of a junk bond. 
D) none of the above.

Question 3

Applebee sold an issue of 30-year,$1,000 par value bonds to the public.The coupon rate of 8.75% is payable annually.It is now five years later,and the current market rate of interest is 7.25%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Accepted Answer

A) $715 
B) $1,171 
C) $1,225 
D) $697 
A) $715 
B) $1,171 
C) $1,225 
D) $697

Question 4

Why are longer-term bonds more sensitive to changes in interest rates than shorter-term bonds?

Accepted Answer

Longer-term bonds are more price-sensiti

Question 5

The sensitivity of a bond's value to changing interest rates depends on both the bond's time to maturity and its pattern of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

BCD's $1,000 par value bonds currently sell for $798.50.The coupon rate is 10%,paid semiannually.If the bonds have five years before maturity,what is the yield to maturity or expected rate of return?

Accepted Answer

$1,000(PVIF)
By trial and erro

Question 7

Which type of value is shown on the firm's balance sheet?

Accepted Answer

A) Book value 
B) Liquidation value 
C) Market value 
D) Intrinsic value 
A) Book value 
B) Liquidation value 
C) Market value 
D) Intrinsic value

Question 8

Caldwell,Inc.sold an issue of 30-year,$1,000 par value bonds to the public.The bonds carry a 10.85% coupon rate and pay interest semiannually.It is now 12 years later.The current market rate of interest on the Caldwell bonds is 8.45%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Accepted Answer

A) $751 
B) $1,177 
C) $1,220 
D) $976 
A) $751 
B) $1,177 
C) $1,220 
D) $976

Question 9

Which of the following investors incurs the least risk?

Accepted Answer

A) Bondholders 
B) Preferred stockholders 
C) Common stockholders 
D) All of the above bear equal risk 
A) Bondholders 
B) Preferred stockholders 
C) Common stockholders 
D) All of the above bear equal risk

Question 10

Bond ratings measure the interest rate risk of a given bond issue.

Accepted Answer

A) True 
 B)False

Question 11

Brookline,Inc.just sold an issue of 30-year bonds for $1,107.20.Investors require a rate of return on these bonds of 7.75%.The bonds pay interest semiannually.What is the coupon rate of the bonds?

Accepted Answer

A) 7.750% 
B) 11.072% 
C) 9.375% 
D) 8.675% 
A) 7.750% 
B) 11.072% 
C) 9.375% 
D) 8.675%

Question 12

The higher the bond rating,the more default risk associated with the bond.

Accepted Answer

A) True 
 B)False

Question 13

Lambda Co.has bonds outstanding that mature in 10 years.The bonds have $1,000 par value,pay interest annually at a rate of 9%,and have a current selling price of $1,125.The yield to maturity on the bonds is:

Accepted Answer

A) 7.20%. 
B) 9%. 
C) 10.12%. 
D) 14.40%. 
A) 7.20%. 
B) 9%. 
C) 10.12%. 
D) 14.40%.

Question 14

Cassel Corp.bonds pay an annual coupon rate of 10%.If investors' required rate of return is now 8% on these bonds,they will be priced at:

Accepted Answer

A) par value. 
B) a premium to par value. 
C) a discount to par value. 
D) cannot be determined from information given. 
A) par value. 
B) a premium to par value. 
C) a discount to par value. 
D) cannot be determined from information given.

If the market price of a bond increases,then:

Eurobonds are:

Applebee sold an issue of 30-year,$1,000 par value bonds to the public.The coupon rate of 8.75% is payable annually.It is now five years later,and the current market rate of interest is 7.25%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Why are longer-term bonds more sensitive to changes in interest rates than shorter-term bonds?

The sensitivity of a bond's value to changing interest rates depends on both the bond's time to maturity and its pattern of cash flows.

BCD's $1,000 par value bonds currently sell for $798.50.The coupon rate is 10%,paid semiannually.If the bonds have five years before maturity,what is the yield to maturity or expected rate of return?

Which type of value is shown on the firm's balance sheet?

Which of the following investors incurs the least risk?

Bond ratings measure the interest rate risk of a given bond issue.

Brookline,Inc.just sold an issue of 30-year bonds for $1,107.20.Investors require a rate of return on these bonds of 7.75%.The bonds pay interest semiannually.What is the coupon rate of the bonds?

The higher the bond rating,the more default risk associated with the bond.

Lambda Co.has bonds outstanding that mature in 10 years.The bonds have $1,000 par value,pay interest annually at a rate of 9%,and have a current selling price of $1,125.The yield to maturity on the bonds is:

Cassel Corp.bonds pay an annual coupon rate of 10%.If investors' required rate of return is now 8% on these bonds,they will be priced at:

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

Exam 9: Debt Valuation and Interest Rates

If the market price of a bond increases,then:

Eurobonds are:

Applebee sold an issue of 30-year,$1,000 par value bonds to the public.The coupon rate of 8.75% is payable annually.It is now five years later,and the current market rate of interest is 7.25%.What is the current market price (intrinsic value)of the bonds? Round off to the nearest $1.

Why are longer-term bonds more sensitive to changes in interest rates than shorter-term bonds?

The sensitivity of a bond's value to changing interest rates depends on both the bond's time to maturity and its pattern of cash flows.

BCD's $1,000 par value bonds currently sell for $798.50.The coupon rate is 10%,paid semiannually.If the bonds have five years before maturity,what is the yield to maturity or expected rate of return?

Which type of value is shown on the firm's balance sheet?

Which of the following investors incurs the least risk?

Bond ratings measure the interest rate risk of a given bond issue.

Brookline,Inc.just sold an issue of 30-year bonds for $1,107.20.Investors require a rate of return on these bonds of 7.75%.The bonds pay interest semiannually.What is the coupon rate of the bonds?

The higher the bond rating,the more default risk associated with the bond.

Lambda Co.has bonds outstanding that mature in 10 years.The bonds have $1,000 par value,pay interest annually at a rate of 9%,and have a current selling price of $1,125.The yield to maturity on the bonds is:

Cassel Corp.bonds pay an annual coupon rate of 10%.If investors' required rate of return is now 8% on these bonds,they will be priced at:

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