Exam 10: Bond Prices and Yields

The price of a bond (with par value of $1,000) at the beginning of a period is $980 and at the end of the period is $975. What is the holding-period return if the annual coupon rate is 4.5%?

You buy a 10-year $1,000 par value 4% annual-payment coupon bond priced to yield 6%. You do not sell the bond at year-end. If you are in a 15% tax bracket, at year-end you will owe taxes on this investment equal to ________.

Consider the liquidity preference theory of the term structure of interest rates. On average, one would expect investors to require ________.

Bonds with coupon rates that fall when the general level of interest rates rise are called ________.

The price on a Treasury bond is 104.3625, with a yield to maturity of 3.45%. The price on a comparable maturity corporate bond is 103.75, with a yield to maturity of 4.59%. What is the approximate percentage value of the credit risk of the corporate bond?

The invoice price of a bond is the ________.

A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000. If the bond matures in 16 years, it should sell for a price of ________ today.

Yields on municipal bonds are generally lower than yields on similar corporate bonds because of differences in ________.

Consider the following $1,000 par value zero-coupon bonds: The expected 1-year interest rate 3 years from now should be ________.

A discount bond that pays interest semiannually will: I. Have a lower price than an equivalent annual payment bond II. Have a higher EAR than an equivalent annual payment bond III. Sell for less than its conversion value

Floating-rate bonds have a ________ that is adjusted with current market interest rates.

Serial bonds are associated with ________.

A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 5 years, and is selling today at $785. The actual yield to maturity on this bond is ________.

Analysis of bond returns over a multiyear horizon based on forecasts of the bond's yield to maturity and reinvestment rate of coupons is called ________.

A Japanese firm issued and sold a pound-denominated bond in the United Kingdom. A U.S. firm issued bonds denominated in dollars but sold the bonds in Japan. Which one of the following statements is correct?

$1,000 par value zero-coupon bonds (ignore liquidity premiums) The expected 2-year interest rate 3 years from now should be ________.

You can be sure that a bond will sell at a premium to par when ________.

TIPS offer investors inflation protection by ________ by the inflation rate each year.

Consider a 7-year bond with a 9% coupon and a yield to maturity of 12%. If interest rates remain constant, 1 year from now the price of this bond will be ________.

An investor pays $989.40 for a bond. The bond has an annual coupon rate of 4.8%. What is the current yield on this bond?