Question 1

A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made two months ago and the coupon rate is 12%,the invoice price of the bond will be ____________.

Accepted Answer

A)  $1,100
B)  $1,110
C)  $1,150
D)  $1,160
E)  none of the aboveF) B) and E)
G) A) and E)

Question 2

A coupon bond that pays interest annually is selling at par value of $1,000,matures in 5 years,and has a coupon rate of 9%.The yield to maturity on this bond is:

Accepted Answer

A)  8.0%
B)  8.3%
C)  9.0%
D)  10.0%
E)  none of the aboveF) All of the above
G) A) and B)

Question 3

You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell.

Accepted Answer

A)  10.00%
B)  20.42%
C)  13.8%
D)  1.4%
E)  none of the aboveF) A) and D)
G) A) and E)

Question 4

Floating-rate bonds are designed to ___________ while convertible bonds are designed to __________.

Accepted Answer

A)  minimize the holders' interest rate risk; give the investor the ability to share in the price appreciation of the company's stock
B)  maximize the holders' interest rate risk; give the investor the ability to share in the price appreciation of the company's stock
C)  minimize the holders' interest rate risk; give the investor the ability to benefit from interest rate changes
D)  maximize the holders' interest rate risk; give investor the ability to share in the profits of the issuing company
E)  none of the aboveF) C) and E)
G) B) and D)

Question 5

A bond will sell at a discount when __________.

Accepted Answer

A)  the coupon rate is greater than the current yield and the current yield is greater than yield to maturity
B)  the coupon rate is greater than yield to maturity
C)  the coupon rate is less than the current yield and the current yield is greater than the yield to maturity
D)  the coupon rate is less than the current yield and the current yield is less than yield to maturity
E)  none of the above are true.F) A) and B)
G) A) and E)

Question 6

A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%.A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%.The default risk premiums on the bonds issued by Shell and Ford,respectively,are

Accepted Answer

A)  1.0% and 1.2%
B)  0.7% and 1.5%
C)  1.2% and 1.0%
D)  0.8% and 1.3%
E)  none of the aboveF) A) and D)
G) C) and D)

Question 7

A coupon bond that pays interest annually has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

Accepted Answer

A)  $712.99
B)  $620.92
C)  $1,123.01
D)  $886.28
E)  $1,000.00F) A) and B)
G) C) and D)

Question 8

A coupon bond pays annual interest,has a par value of $1,000,matures in 4 years,has a coupon rate of 8.25%,and has a yield to maturity of 8.64%.The current yield on this bond is ___________.

Accepted Answer

A)  8.65%
B)  8.45%
C)  7.95%
D)  8.36%
E)  none of the aboveF) A) and E)
G) C) and E)

Question 9

You purchased an annual interest coupon bond one year ago that had 6 years remaining to maturity at that time.The coupon interest rate was 10% and the par value was $1,000.At the time you purchased the bond,the yield to maturity was 8%.If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%,your annual total rate of return on holding the bond for that year would have been _________.

Accepted Answer

A)  7.00%
B)  7.82%
C)  8.00%
D)  11.95%
E)  none of the aboveF) B) and E)
G) A) and B)

Question 10

A coupon bond that pays interest annually,has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be _________ if the coupon rate is 12%.

Accepted Answer

A)  $922.77
B)  $924.16
C)  $1,075.82
D)  $1,077.20
E)  none of the aboveF) B) and C)
G) D) and E)

Question 11

A 12% coupon bond,semiannual payments,is callable in 5 years.The call price is $1,120; if the bond is selling today for $1,110,what is the yield to call?

Accepted Answer

A)  12.03%.
B)  10.86%.
C)  10.95%.
D)  9.14%.
E)  none of the above.F) A) and B)
G) A) and C)

Question 12

A convertible bond has a par value of $1,000 and a current market value of $1150.The current price of the issuing firm's stock is $65 and the conversion ratio is 15 shares.The bond's conversion premium is _________.

Accepted Answer

A)  $40
B)  $150
C)  $175
D)  $200
E)  none of the aboveF) A) and B)
G) C) and D)

Question 13

You have just purchased a 12-year zero-coupon bond with a yield to maturity of 9% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 10% at the time you sell.

Accepted Answer

A)  10.00%
B)  20.42%
C)  -1.4%
D)  1.4%
E)  none of the aboveF) B) and E)
G) B) and D)

Question 14

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 10%,____________.

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
E)  none of the aboveF) A) and B)
G) A) and C)

Question 15

A CDS is a

Accepted Answer

A)  Command Duty Supervisor
B)  collateralized debt security
C)  commercial debt servicer
D)  collateralized debenture security
E)  credit default swapF) A) and E)
G) A) and D)

Question 16

You purchased an annual interest coupon bond one year ago that now has 18 years remaining until maturity.The coupon rate of interest was 11% and par value was $1,000.At the time you purchased the bond,the yield to maturity was 10%.The amount you paid for this bond one year ago was

Accepted Answer

A)  $1,057.50
B)  $1,075.50
C)  $1,083.65
D)  $1.092.46
E)  $1,104.13F) A) and C)
G) A) and B)

Question 17

A coupon bond that pays interest semi-annually is selling at par value of $1,000,matures in 7 years,and has a coupon rate of 8.6%.The yield to maturity on this bond is:

Accepted Answer

A)  8.0%
B)  8.6%
C)  9.0%
D)  10.0%
E)  none of the aboveF) A) and E)
G) All of the above

Question 18

A firm with a low rating from the bond rating agencies would have

Accepted Answer

A)  a low times interest earned ratio
B)  a low debt to equity ratio
C)  a low quick ratio
D)  B and C
E)  A and CF) A) and B)
G) A) and C)

Question 19

A convertible bond has a par value of $1,000 and a current market price of $1105.The current price of the issuing firm's stock is $20 and the conversion ratio is 35 shares.The bond's market conversion value is ______.

Accepted Answer

A)  $700
B)  $810
C)  $870
D)  $1,000
E)  none of the aboveF) A) and B)
G) A) and C)

Question 20

Three years ago you purchased a bond for $974.69.The bond had three years to maturity,a coupon rate of 8%,paid annually,and a face value of $1,000.Each year you reinvested all coupon interest at the prevailing reinvestment rate shown in the table below.Today is the bond's maturity date.What is your realized compound yield on the bond?

Accepted Answer

A)  6.43%
B)  7.96%
C)  8.23%
D)  8.97%
E)  9.13%F) B) and D)
G) A) and D)

Exam 14: Bond Prices and Yields

Correct Answer
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You purchased an annual interest coupon bond one year ago that now has 18 years remaining until maturity.The coupon rate of interest was 11% and par value was $1,000.At the time you purchased the bond,the yield to maturity was 10%.The amount you paid for this bond one year ago was

Correct Answer
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You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell.

Correct Answer
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Correct Answer
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A CDS is a

Correct Answer
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A 12% coupon bond,semiannual payments,is callable in 5 years.The call price is $1,120; if the bond is selling today for $1,110,what is the yield to call?

Correct Answer
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A convertible bond has a par value of $1,000 and a current market price of $1105.The current price of the issuing firm's stock is $20 and the conversion ratio is 35 shares.The bond's market conversion value is ______.

Correct Answer
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A bond will sell at a discount when __________.

Correct Answer
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A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made two months ago and the coupon rate is 12%,the invoice price of the bond will be ____________.

Correct Answer
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A convertible bond has a par value of $1,000 and a current market value of $1150.The current price of the issuing firm's stock is $65 and the conversion ratio is 15 shares.The bond's conversion premium is _________.

Correct Answer
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A coupon bond that pays interest annually has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

Correct Answer
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A coupon bond pays annual interest,has a par value of $1,000,matures in 4 years,has a coupon rate of 8.25%,and has a yield to maturity of 8.64%.The current yield on this bond is ___________.

Correct Answer
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Floating-rate bonds are designed to _ while convertible bonds are designed to .

Correct Answer
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You have just purchased a 12-year zero-coupon bond with a yield to maturity of 9% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 10% at the time you sell.

Correct Answer
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A firm with a low rating from the bond rating agencies would have

Correct Answer
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A coupon bond that pays interest semi-annually is selling at par value of $1,000,matures in 7 years,and has a coupon rate of 8.6%.The yield to maturity on this bond is:

Correct Answer
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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 10%,____________.

Correct Answer
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A coupon bond that pays interest annually is selling at par value of $1,000,matures in 5 years,and has a coupon rate of 9%.The yield to maturity on this bond is:

Correct Answer
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Correct Answer
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A coupon bond that pays interest annually,has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be _________ if the coupon rate is 12%.

Correct Answer
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Exam 14: Bond Prices and Yields

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You purchased an annual interest coupon bond one year ago that now has 18 years remaining until maturity.The coupon rate of interest was 11% and par value was $1,000.At the time you purchased the bond,the yield to maturity was 10%.The amount you paid for this bond one year ago was

Correct AnswerverifiedShow Answer

You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A CDS is a

Correct AnswerverifiedShow Answer

A 12% coupon bond,semiannual payments,is callable in 5 years.The call price is $1,120; if the bond is selling today for $1,110,what is the yield to call?

Correct AnswerverifiedShow Answer

A convertible bond has a par value of $1,000 and a current market price of $1105.The current price of the issuing firm's stock is $20 and the conversion ratio is 35 shares.The bond's market conversion value is ______.

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A bond will sell at a discount when __________.

Correct AnswerverifiedShow Answer

A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made two months ago and the coupon rate is 12%,the invoice price of the bond will be ____________.

Correct AnswerverifiedShow Answer

A convertible bond has a par value of $1,000 and a current market value of $1150.The current price of the issuing firm's stock is $65 and the conversion ratio is 15 shares.The bond's conversion premium is _________.

Correct AnswerverifiedShow Answer

A coupon bond that pays interest annually has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be ______ if the coupon rate is 7%.

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A coupon bond pays annual interest,has a par value of $1,000,matures in 4 years,has a coupon rate of 8.25%,and has a yield to maturity of 8.64%.The current yield on this bond is ___________.

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Floating-rate bonds are designed to ___________ while convertible bonds are designed to __________.

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You have just purchased a 12-year zero-coupon bond with a yield to maturity of 9% and a par value of $1,000.What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 10% at the time you sell.

Correct AnswerverifiedShow Answer

A firm with a low rating from the bond rating agencies would have

Correct AnswerverifiedShow Answer

A coupon bond that pays interest semi-annually is selling at par value of $1,000,matures in 7 years,and has a coupon rate of 8.6%.The yield to maturity on this bond is:

Correct AnswerverifiedShow Answer

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 10%,____________.

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A coupon bond that pays interest annually is selling at par value of $1,000,matures in 5 years,and has a coupon rate of 9%.The yield to maturity on this bond is:

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Correct AnswerverifiedShow Answer

A coupon bond that pays interest annually,has a par value of $1,000,matures in 5 years,and has a yield to maturity of 10%.The intrinsic value of the bond today will be _________ if the coupon rate is 12%.

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Floating-rate bonds are designed to _ while convertible bonds are designed to .

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