1. Stephanie would like to purchase a bond that has a par value of $1,000, pays $80 at the end of each year in coupon payments, and has ten years remaining until maturity. If the prevailing annualized yield on other bonds with similar characteristics is 6 percent, how much will Stephanie pay for the bond?

a.	$1,000.00
b.	$1,147.20
c.	$856.80
d.	none of the above

2. Julia just purchased a $1,000 par value bond with a 10 percent annual coupon rate and a life of twenty years. The bond has four years remaining until maturity, and the yield to maturity is 12 percent. How much did Julia pay for the bond?

a.	$1,063.40
b.	$1,000
c.	$939.25
d.	none of the above

3. To determine the present value of a bond that pays semiannual interest, which of the following adjustments should not be made to compute the price of the bond?

a.	The annualized coupon should be split in half.
b.	The annual discount rate should be divided by 2.
c.	The number of annual periods should be doubled.
d.	The par value should be split in half.
e.	All of the above adjustments have to be made.

4. A $1,000 par value bond, paying $50 semiannually, with an 8 percent yield to maturity and five years remaining to maturity should sell for

a.	$1,000.00.
b.	$1,081.11.
c.	$798.70.
d.	$880.22.
e.	none of the above.

5. If the level of inflation is expected to ____, there will be ____ pressure on interest rates and ____ pressure on the required rate of return on bonds.

a.	increase; upward; downward
b.	decrease; upward; downward
c.	decrease; upward; upward
d.	increase; upward; upward
e.	increase; downward; upward

6. An economic announcement signaling ____ economic growth in the future will probably cause bond prices to ____.

a.	weak; decrease
b.	strong; increase
c.	weak; increase
d.	strong; decrease
e.	Answers C and D are correct.

7. Because of a change in the required rate of return from 11 percent to 13 percent, the bond price of a zero-coupon bond will fall from $1,000 to $860. Thus, the bond price elasticity for this bond is

a.	0.77.
b.	-0.77.
c.	-0.90.
d.	-1.06.
e.	none of the above.

8. The required rate of return on a certain bond changes from 12 percent to 8 percent, causing the price of the bond to change from $900 to $1,100. The bond price elasticity of this bond is

a.	-0.36.
b.	-0.44.
c.	-0.55.
d.	-0.67.
e.	0.67.

9. Assume a bond with a $1,000 par value and an 11 percent coupon rate, two years remaining to maturity, and a 10 percent yield to maturity. The duration of this bond is ____ years.

a.	1.92
b.	1.50
c.	1.90
d.	none of the above

10. A bond has a $1,000 par value and an 8 percent coupon rate. The bond has four years remaining to maturity and a 10 percent yield to maturity. This bond's modified duration is ____ years.

a.	1.33
b.	1.27
c.	3.24
d.	1.31
e.	none of the above