1. The value of any asset is the present value of its expected future cash flows.

True/False

2.

Stocks provide direct cash flows to investors from:

Mark all that apply

capital gains

dividends

sales

earnings

3.

You bought a $1,000 face value bond yesterday for $1,300. Today the price is $1,279. If the bond matures in 17 years and pays a 4% coupon, what is today's YTM?

NOTE: answer in decimal format to the fourth decimal place and not in percentage format.

4. You are looking to invest in a zero coupon bond. It has 15 years left to maturity and is currently selling at 0.919 percent of face value. What is the YTM for this bond?

NOTE: answer in decimal format to the fourth decimal place and not in percentage format.

5. You do analysis on a bond issue by IBM. You feel the required return on the bond should be 3.5%. The bond has 20 years to maturity and pays a 5.35% coupon semi-annually. At what price are you willing to pay for this bond? (round to the cent)

6.

If you are in the 25% tax bracket and you see that AAA corporate bonds are yielding 3% meanwhile AAA municipal bonds are yielding 2.5%. Which bonds should you buy?

corporate bond

municipal bond

7. Mark all that apply. If you are concerned that interest rates are going to rise in the near future, which type of bond would you want to own?

Mark all that apply

short maturity

low coupon

long maturity

high coupon

8. Which of the following impacts bonds interest rate price risk ?

Mark all that apply

coupon rate

size of the bond

it's credit rating

it's liquidity

maturity date

9.

Mark all that apply. Bond credit risk is an important part of the bond market. Who decides credit quality of bond issues?

Group of answer choices

Municipal governments

Moody's

US govermemt

No one

Standard and Poor's