1. Which of the following statements is CORRECT?*

A) If a coupon bond is selling at par, its current yield equals its yield to maturity.

B) If a coupon bond is selling at a discount, its price will continue to decline until it reaches its par value at maturity.

C) If interest rates increase, the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.

D) If a bond's yield to maturity exceeds its annual coupon, then the bond will trade at a premium.

E) All of the above

2. Mike has just invested in a premium bond that offers an annual coupon rate of 12%, with interest paid annually. The face value of the bond is $1,000 and the difference between the bond's yield to maturity and coupon rate is 3%. The bond matures in 8 years. What is the bond's price?*

A) $1,166

B)$1,000

C)$120

D)$1,120

None of the above

3. O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $975. What is the bond's nominal coupon interest rate?*

A) 7.32%

B) 7.71%

C) 8.12%

D) 8.99%

None of the above

4. Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at _________.*

A) $97.22

B) $104.49

C) $364.08

D) $732.14

None of the above

5. A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8% with interest paid annually. If the current market price is $750, what is the capital gain yield of this bond over the next year?*

A) 0.72%

B) 0.85%

C) 2.58%

D) 3.42%

None of the above