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1 The mostcommonpurchaser(s)of bonds are: life insurance companies and pension funds. speculators. DonaldTrump. JamesBond. 5 points QUESTION 2 Which one of the following statements about
1
- The mostcommonpurchaser(s)of bonds are:
- life insurance companies and pension funds.
- speculators.
- DonaldTrump.
- JamesBond.
5 points
QUESTION 2- Which one of the following statements about vanilla bonds is false?
- They have fixed coupon payments.
- The face value, or par value, for most corporate bonds is $1,000.
- Coupon payments are usually made quarterly.
- The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value.
5 points
QUESTION 3- Which of the following statements is true about zero coupon bonds?
- They typically sell at a premium over par when they are first issued.
- They typically sell for a higher price than similar vanillacoupon bonds.
- They are always convertible into common stock.
- They typically sell at a deep discount below par when they are first issued.
5 points
QUESTION 4- Which one of the following statements is true?
- All else equal long-term bonds have lower price volatility than short-term bonds.
- There is an inverse relation between bond prices and market interest rates.
- All else equal short-term bonds are more risky than long-term bonds.
- All else equal US government bonds are more risky than corporate bonds.
5 points
QUESTION 5- If the bond's coupon rate is equal to the market rate then the bond will sell at a price
- equal to its face value
- greater than its face value
- less than its face value
- equal to its foreign currency value, e.g., its price in British pounds
5 points
QUESTION 6- Bonds sell at a premium when the market rate of interest is:
- less than the bond's coupon rate.
- greater than the bond's coupon rate.
- equal to the bond's coupon rate.
- equal to the risk-free rate.
5 points
QUESTION 7- Bonds sell at a discount when the market rate of interest is:
- less than the bond's coupon rate.
- greater than the bond's coupon rate.
- equal to the bond's coupon rate.
- equal to the risk-free rate.
5 points
QUESTION 8- When calculating the price of a bond that pays a semiannual coupon one needs to
- use double the number of years until maturity for the number of payments
- use half the annual coupon payment
- use half the annual rate of return as the discount rate
- all of the above
5 points
QUESTION 9- The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments
- more than the price of the bond
- equal to zero
- equal to the price of the bond
- less than the price of the bond
5 points
QUESTION 10- An investor owns a 10-year US government bond with a 9 percent coupon rate.If the yield-to-maturity on the bond is 8 percent then this bond is selling for
- its par value.
- a discount.
- a premium.
- its face value.
5 points
QUESTION 11- Which of the following statements is true?
- For a given change in market interest rates, the prices of higher-coupon bonds change more than the prices of lower-coupon bonds.
- If market interest rates rise, a 1-year bond will fall in value more than a 10-year bond.
- If marketinterest rates rise,bond prices will rise.
- If market interest rates rise, a 10-year bond will fall in value more than a 1-year bond.
5 points
QUESTION 12- The three economic factors that affect the shape of the yield curve are:
- the real rate of interest, the expected rate of inflation, and marketability.
- the real rate of interest, the expected rate of inflation, and interest rate risk.
- the nominal rate of interest, the expected rate of inflation, and default risk.
- the real rate of interest, the nominal rate of interest, and currency risk.
5 points
QUESTION 13- Downward-slopping yield curves are usuallyobserved
- when the economy is growingquickly.
- before the beginning of a recession.
- always.
- never.
5 points
QUESTION 14- BA Corp is issuing a 10 year bond with a coupon rate of 8 percent and a par value of $1,000.The market interest rate on similar bonds is currently 6 percent.If the coupon payments are made annually, what is the value of this bond?
5 points
QUESTION 15- Knight, Inc. has issued a 3 year bond with a $1,000 par value and an annual coupon rate of 6 percent.The current market rate of interest is 5 percent.What is the value of this bond if the coupon payments are made semiannually?
5 points
QUESTION 16- Regatta, Inc., has bonds outstanding that pay an 8.250 percent coupon rate on a $1,000 face value.Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent.How many years until the bonds mature if the current value of the bonds is $1,056.57 and payments are made annually?
5 points
QUESTION 17- Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000.If the market interest rate on these types of bonds is currently 9 percent, what is the current price of this bond?
5 points
QUESTION 18- Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000.If the current market value of the bond is $3,104.61, what is the bond's yield to maturity?
5 points
QUESTION 19- Rudy Sandberg wants to invest in 5 year bonds that are currently priced at $850.00.The bonds have a coupon rate of 10 percent and semiannual coupon payments.If the par value of the bonds is $1,000, what is the bond's effective annual yield (EAY)?
5 points
QUESTION 20- You own a 5 year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments.The bond is currently worth $810.46.If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years left until maturity?
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