Question 1

The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the two year, zero-coupon, risk-free bond shown?

Accepted Answer

A)  1.43% 
B)  5.71% 
C)  0.05% 
D)  2.85% 
A)  1.43% 
B)  5.71% 
C)  0.05% 
D)  2.85%

Question 2

The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in five years. The bond certificate indicates that the stated coupon rate for this bond is 8.5% and that the coupon payments are to be made semiannually. Assuming that this bond trades for $1081.73, then the YTM for this bond is closest to ________.

Accepted Answer

A)  5.2% 
B)  7.87% 
C)  6.56% 
D)  9.18% 
A)  5.2% 
B)  7.87% 
C)  6.56% 
D)  9.18%

Question 3

An investor purchases a 30-year, zero-coupon bond with a face value of $5000 and a yield to maturity of 8.4%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change?

Accepted Answer

A)  6.72% 
B)  5.04% 
C)  8.40% 
D)  4.20% 
A)  6.72% 
B)  5.04% 
C)  8.40% 
D)  4.20%

Question 4

Use the information for the question(s) below.  
-The above information is for a corporate bond issued by the Markel Corporation. What sort of bond is this?

Accepted Answer

A)  a high-risk bond 
B)  an investment grade bond 
C)  a speculative bond 
D)  a high-yield bond 
A)  a high-risk bond 
B)  an investment grade bond 
C)  a speculative bond 
D)  a high-yield bond

Question 5

How are the cash flows of a coupon bond different from an amortizing loan?

Accepted Answer

A COUPON BOND PAYS INTEREST OVER THE LIF

Question 6

Use the information for the question(s) below.
The Sisyphean Company has a bond outstanding with a face value of $1000 that reaches maturity in 15 years. The bond certificate indicates that the stated coupon rate for this bond is 8% and that the coupon payments are to be made semiannually.
-How much are each of the semiannual coupon payments? Assuming the appropriate YTM on the Sisyphean bond is 8.8%, then at what price should this bond trade for?

Accepted Answer

Coupon payments = (coupon rate

Question 7

What care, if any, should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

Accepted Answer

A typical coupon bond will have the firs

Question 8

A bond has five years to maturity, a $1000 face value, and a 5.5% coupon rate with annual coupons. What is its yield to maturity if it is currently trading at $846.11?

Accepted Answer

A)  11.41% 
B)  13.31% 
C)  7.61% 
D)  9.51% 
A)  11.41% 
B)  13.31% 
C)  7.61% 
D)  9.51%

Question 9

Why are the interest rates of U.S. Treasury securities less than the interest rates of equivalent corporate bonds?

Accepted Answer

A)  The U.S. government has a high credit spread. 
B)  There is significant risk that the U.S. government will default. 
C)  U.S. Treasury securities are widely regarded to be risk-free. 
D)  U.S. Treasury securities yield inflation adjusted interest rates. 
A)  The U.S. government has a high credit spread. 
B)  There is significant risk that the U.S. government will default. 
C)  U.S. Treasury securities are widely regarded to be risk-free. 
D)  U.S. Treasury securities yield inflation adjusted interest rates.

The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the two year, zero-coupon, risk-free bond shown?

An investor purchases a 30-year, zero-coupon bond with a face value of $5000 and a yield to maturity of 8.4%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change?

Use the information for the question(s) below. -The above information is for a corporate bond issued by the Markel Corporation. What sort of bond is this?

How are the cash flows of a coupon bond different from an amortizing loan?

What care, if any, should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

A bond has five years to maturity, a $1000 face value, and a 5.5% coupon rate with annual coupons. What is its yield to maturity if it is currently trading at $846.11?

Why are the interest rates of U.S. Treasury securities less than the interest rates of equivalent corporate bonds?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 6: Bonds

The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the two year, zero-coupon, risk-free bond shown?

An investor purchases a 30-year, zero-coupon bond with a face value of $5000 and a yield to maturity of 8.4%. He sells this bond ten years later. What is the rate of return on his investment, assuming yield to maturity does not change?

Use the information for the question(s) below. -The above information is for a corporate bond issued by the Markel Corporation. What sort of bond is this?

How are the cash flows of a coupon bond different from an amortizing loan?

What care, if any, should be taken regarding the sign of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

A bond has five years to maturity, a $1000 face value, and a 5.5% coupon rate with annual coupons. What is its yield to maturity if it is currently trading at $846.11?

Why are the interest rates of U.S. Treasury securities less than the interest rates of equivalent corporate bonds?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters