Question 1

Which of the following is fixed on a coupon bond?

Accepted Answer

A)  coupon rate 
B)  current yield 
C)  market price 
D)  yield to maturity

Question 2

Suppose you purchase a bond with a coupon of $50 for $1,010.You sell it one year later for $900.What rate of return did you earn? Report a percentage with two decimal places.

Accepted Answer

The answer of Suppose you purchase a bond with a...

Question 3

For simple loans,the yield to maturity

Accepted Answer

A)  is always less than the specified simple interest rate. 
B)  is always greater than the specified simple interest rate. 
C)  is always equal to the specified simple interest rate. 
D)  may be less than, greater than, or equal to the specified simple interest rate, depending on the maturity of the loan.

Question 4

Suppose Matt's New Cars issues and sells a one-year discount bond for $9,259 and repays $10,000 at maturity.The interest rate on this bond would be

Accepted Answer

A)  2.6%. 
B)  7.41%. 
C)  8%. 
D)  10%.

Question 5

A corporation issues a three year bond with a coupon of $50 and a face value of $1,000.Immediately after being issued,market interest rates decline to 4%.What is the price of the bond? Report your answer to the nearest dollar.

Accepted Answer

The answer of A corporation issues a three year bond...

Question 6

The coupon rate is the

Accepted Answer

A)  annual coupon payment divided by the face value of the bond. 
B)  annual coupon payment divided by the market value of the bond. 
C)  difference between the face value of the bond and its par value. 
D)  coupon paid every 6 months divided by par value.

Question 7

What is the price of a coupon bond that has annual coupon payments of $85,a par value of $1,000,a yield to maturity of 10%,and a maturity of three years?

Accepted Answer

A)  $211.38 
B)  $898.84 
C)  $962.70 
D)  $1,255.00

Question 8

Suppose you have two clients who need your services for two years.One agreed to pay you $50,000 one year from now and another $50,000 in two years while the other paid $35,000 after one year,but $65,000 after two years.Assuming an interest rate of 10%,which one has a higher present value? Round off to the nearest dollar.

Accepted Answer

The answer of Suppose you have two clients who need...

Question 9

The amount of funds the borrower receives from the lender with a simple loan is called the

Accepted Answer

A)  principal. 
B)  equity. 
C)  claim. 
D)  collateral.

Question 10

A capital gain occurs when the

Accepted Answer

A)  coupon rate increases. 
B)  current yield increases. 
C)  price of an asset increases. 
D)  yield to maturity increases.

Question 11

What is the yield on a discount basis for a U.S.Treasury bill that has a face value of $10,000,has a price of $9,500,and will mature in 180 days?

Accepted Answer

A)  5.00% 
B)  5.25% 
C)  10.00% 
D)  10.67%

Exam 3: Interest Rates and Rates of Return