Question 1

________ are examples of synthetically created zero-coupon bonds.

Accepted Answer

A)  COLTS 
B)  OPOSSMS 
C)  STRIPS 
D)  ARMs 
A)  COLTS 
B)  OPOSSMS 
C)  STRIPS 
D)  ARMs

Question 2

Yields on municipal bonds are typically ________ yields on corporate bonds of similar risk and time to maturity.

Accepted Answer

A)  lower than 
B)  slightly higher than 
C)  identical to 
D)  twice as high as 
A)  lower than 
B)  slightly higher than 
C)  identical to 
D)  twice as high as

Question 3

If the quote for a Treasury bond is listed in the newspaper as 99.25 bid, 99.26 ask, the actual price at which you can sell this bond given a $10,000 par value is ________.

Accepted Answer

A)  $9,828.12 
B)  $9,925 
C)  $9,934.37 
D)  $9,955.43 
A)  $9,828.12 
B)  $9,925 
C)  $9,934.37 
D)  $9,955.43

Question 4

Which country experienced the largest-ever sovereign default in 2012?

Accepted Answer

A)  Germany 
B)  Ireland 
C)  Greece 
D)  Portugal 
A)  Germany 
B)  Ireland 
C)  Greece 
D)  Portugal

Question 5

Consider the following $1,000 par value zero-coupon bonds:
 
The expected 1-year interest rate 4 years from now should be ________.

Accepted Answer

A)  16% 
B)  18% 
C)  20% 
D)  22% 
A)  16% 
B)  18% 
C)  20% 
D)  22%

Question 6

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, ________.

Accepted Answer

A)  both bonds will increase in value but bond A will increase more than bond B 
B)  both bonds will increase in value but bond B will increase more than bond A 
C)  both bonds will decrease in value but bond A will decrease more than bond B 
D)  both bonds will decrease in value but bond B will decrease more than bond A 
A)  both bonds will increase in value but bond A will increase more than bond B 
B)  both bonds will increase in value but bond B will increase more than bond A 
C)  both bonds will decrease in value but bond A will decrease more than bond B 
D)  both bonds will decrease in value but bond B will decrease more than bond A

Question 7

A 1% decline in yield will have the least effect on the price of a bond with a ________.

Accepted Answer

A)  10-year maturity, selling at 80 
B)  10-year maturity, selling at 100 
C)  20-year maturity, selling at 80 
D)  20-year maturity, selling at 100 
A)  10-year maturity, selling at 80 
B)  10-year maturity, selling at 100 
C)  20-year maturity, selling at 80 
D)  20-year maturity, selling at 100

Question 8

A Treasury bond due in 1 year has a yield of 6.3%, while a Treasury bond due in 5 years has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corp. has a yield of 9.6%, while a bond due in 1 year issued by High Country Marketing Corp. has a yield of 6.8%. The default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp. are, respectively, ________ and ________.

Accepted Answer

A) .4%; .3% 
B)  .4%; .5% 
C)  .5%; .5% 
D)  .5%; .8% 
A) .4%; .3% 
B)  .4%; .5% 
C)  .5%; .5% 
D)  .5%; .8%

Question 9

On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds.
 
If the volatility of interest rates is expected to increase, then Joe Hill should ________.

Accepted Answer

A)  prefer the Wildwood bond to the Asbury bond 
B)  prefer the Asbury bond to the Wildwood bond 
C)  be indifferent between the Wildwood bond and the Asbury bond 
D)  The answer cannot be determined from the information given. 
A)  prefer the Wildwood bond to the Asbury bond 
B)  prefer the Asbury bond to the Wildwood bond 
C)  be indifferent between the Wildwood bond and the Asbury bond 
D)  The answer cannot be determined from the information given.

Question 10

Sinking funds are commonly viewed as protecting the ________ of the bond.

Accepted Answer

A)  issuer 
B)  underwriter 
C)  holder 
D)  dealer 
A)  issuer 
B)  underwriter 
C)  holder 
D)  dealer

Question 11

You purchased a 5-year annual-interest coupon bond 1 year ago. Its coupon interest rate was 6%, and its par value was $1,000. At the time you purchased the bond, the yield to maturity was 4%. If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 3%, your annual total rate of return on holding the bond for that year would have been approximately ________.

Accepted Answer

A)  5% 
B)  5.5% 
C)  7.6% 
D)  8.9% 
A)  5% 
B)  5.5% 
C)  7.6% 
D)  8.9%

Question 12

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

Accepted Answer

A)  6% 
B)  7.5 % 
C)  9.02% 
D)  10.08% 
A)  6% 
B)  7.5 % 
C)  9.02% 
D)  10.08%

Question 13

A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________.

Accepted Answer

A)  6% 
B)  6.58% 
C)  7.2% 
D)  8% 
A)  6% 
B)  6.58% 
C)  7.2% 
D)  8%

Question 14

A collateral trust bond is ________.

Accepted Answer

A)  secured by other securities held by the firm 
B)  secured by equipment owned by the firm 
C)  secured by property owned by the firm 
D)  unsecured 
A)  secured by other securities held by the firm 
B)  secured by equipment owned by the firm 
C)  secured by property owned by the firm 
D)  unsecured

Question 15

The yield to maturity of a 10-year zero-coupon bond with a par value of $1,000 and a market price of $625 is ________.

Accepted Answer

A)  4.8% 
B)  6.1% 
C)  7.7% 
D)  10.4% 
A)  4.8% 
B)  6.1% 
C)  7.7% 
D)  10.4%

Question 16

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. The yield to maturity on this bond is ________.

Accepted Answer

A)  6% 
B)  7.23% 
C)  8.12% 
D)  9.45% 
A)  6% 
B)  7.23% 
C)  8.12% 
D)  9.45%

________ are examples of synthetically created zero-coupon bonds.

Yields on municipal bonds are typically ________ yields on corporate bonds of similar risk and time to maturity.

If the quote for a Treasury bond is listed in the newspaper as 99.25 bid, 99.26 ask, the actual price at which you can sell this bond given a $10,000 par value is ________.

Which country experienced the largest-ever sovereign default in 2012?

Consider the following $1,000 par value zero-coupon bonds: The expected 1-year interest rate 4 years from now should be ________.

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, ________.

A 1% decline in yield will have the least effect on the price of a bond with a ________.

On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds. If the volatility of interest rates is expected to increase, then Joe Hill should ________.

Sinking funds are commonly viewed as protecting the ________ of the bond.

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

A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________.

A collateral trust bond is ________.

The yield to maturity of a 10-year zero-coupon bond with a par value of $1,000 and a market price of $625 is ________.

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. The yield to maturity on this bond is ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters

Exam 10: Bond Prices and Yields

________ are examples of synthetically created zero-coupon bonds.

Yields on municipal bonds are typically ________ yields on corporate bonds of similar risk and time to maturity.

If the quote for a Treasury bond is listed in the newspaper as 99.25 bid, 99.26 ask, the actual price at which you can sell this bond given a $10,000 par value is ________.

Which country experienced the largest-ever sovereign default in 2012?

Consider the following $1,000 par value zero-coupon bonds: The expected 1-year interest rate 4 years from now should be ________.

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, ________.

A 1% decline in yield will have the least effect on the price of a bond with a ________.

On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds. If the volatility of interest rates is expected to increase, then Joe Hill should ________.

Sinking funds are commonly viewed as protecting the ________ of the bond.

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

A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________.

A collateral trust bond is ________.

The yield to maturity of a 10-year zero-coupon bond with a par value of $1,000 and a market price of $625 is ________.

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. The yield to maturity on this bond is ________.

Investments: Background and Issues

Asset Classes and Financial Instruments

Securities Markets

Mutual Funds and Other Investment Companies

Risk, Return, and the Historical Record

Efficient Diversification

Capital Asset Pricing and Arbitrage Pricing Theory

The Efficient Market Hypothesis

Behavioral Finance and Technical Analysis

Managing Bond Portfolios

Macroeconomic and Industry Analysis

Equity Valuation

Financial Statement Analysis

Options Markets

Option Valuation

Futures Markets and Risk Management

Evaluating Investment Performance

International Diversification

Hedge Funds

Taxes, Inflation, and Investment Strategy

Investors and the Investment Process

Filters