1.

A U.S. investor has $20,000. This is used to buy a stock in Sweden that costs 100 Swedish krona per share. At this time the exchange rate is $0.11 = 1 Swedish krona.

One year later the stock can be sold for 105 Swedish krona per share. The investor sells the stock and converts the krona back to dollars. If the return to the U.S. investor (measured in dollars) was -14.1%, what was the exchange rate

		A. $0.09 = 1 Swedish krona
		B. $0.12 = 1 Swedish krona
	C.	$0.06 = 1 Swedish krona
	D.	$0.14 = 1 Swedish krona

2.

A bond just paid its $80 annual coupon. The bond matures in 10 years. The par value of the bond is $1,000. If the yield to maturity of the bond is 7%, the bond value today must be _____.

		A. $561.89
		B. $508.35
		C. $1,070.24
		D. $1,561.89

3.

A bond just paid its annual coupon of $75. It has a $1,000 par value, and will mature in 9 years.

TRUE or FALSE: If the yield to maturity of this bond is 6.2%, the bond will have a market value less than $1,000.

True

False

4.

Bond A has a duration of 8.2 years and a yield to maturity of 8%.

Bond B has a duration of 6.6 years and a yield to maturity of 10%.

The yield to maturity of both bonds increases by .3 percentage points (to 8.3% for A and 10.3% for B).

TRUE or FALSE: Bond A will have the larger percentage decrease in its price.

True

False

5.

Suppose that the exchange rate between the U.S. dollar and the Canadian dollar one year ago was $0.70 = 1 Canadian dollar. Today (so one year later) the exchange rate is $0.73 = 1 Canadian dollar.

TRUE or FALSE: The U.S. dollar depreciated against the Canadian dollar between one year ago and today.

True

False

6.

The ZZZ Corporation has bonds that pay an annual coupon of $75. The par value of the bonds is $1,000. The current market price of the bonds is $900.

TRUE or FALSE: The yield to maturity of these bonds is greater than 7.5%.

True

False