1) Which of the following statements iscorrect?

Select one:

a.The bond trading is mainly conducted on the exchange floor.

c.In terms of capitalization, global stock market is larger than global bond market

d.Municipal bonds are bonds issued by local governments

e.Banks can issue bonds as a way to lend money to the public

4) Which of the following statements about bond's yield to maturity is NOT correct?

Select one:

b.Bond's yield to maturity is a fixed annualrate of return that bond issuers promise to provide.

c.A bond's yield to maturity is calculated by finding the discount rate that makes PV of bond's cash flows equal to the bond's market price.

d.Bond's yield to maturity is investor's annualized expected rate of return at that bond price assuming the investor will hold the bond until maturity.

5) You want to buy a house that costs $300,000 and you can afford to repay a loan no more than $1,800per month. The APR on a 30 year mortgage loan is 4%. If you want to calculate the maximum loan you can take, which Excel function will you use?

Select one:

b.PV

c.RATE

d.PMT

e.NPER

6) Assume that you are considering the purchase of a 20-year bond with an annual coupon rate of 7.5%, payable semiannually. The bond has a face value of $1,000. If the required annual market yield is 7.5% on this bond, what is the maximum price you should be willing to pay for the bond?

Select one:

a.$1,140.00

b.$1,010.00

c.$1,000.00

e.$980.00

7) Which of the following statements is CORRECT?

Select one:

a.If a bond is selling at a discount to par, its current yield will be greater than its yield to maturity.

b.All else equal, bonds with longer maturities have less price risk than bonds with shorter maturities.

c.If a bond is selling at its par value, its current yield equals its capital gains yield.

e.All else equal, bonds with larger coupons have less price risk than bonds with smaller coupons.

8) Which of the following statements is CORRECT?

Select one:

a.If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices.

c.Bonds are generally regarded as being riskier than common stocks, and therefore bonds have higher required returns.

d.Bonds issued by larger companies always have lower yields to maturity (due to less risk) than bonds issued by smaller companies.

e.The market price of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant.

9) A 20-year, annual-coupon bond has an 8.5% annual coupon. If the yield to maturity is 10.5%, what is the bond value for each $1000 par?

Select one:

a.$801.76

c.$843.52

d.$835.38

e.$726.60

10) Moerdyk Corporation's bonds have a 15-year maturity, a 7.5% annual coupon rate payable semiannually, and a par value of $1,000. The current market interest rateis 5.30%. Based on semiannual compounding, what is the bond's price?

Select one:

a.$1,225.7

b.$1,164.05

d.$1,224.05

e.$1,500.06

11) Radoski Corporation's bonds make an annual coupon interest payment of 7.35% every year. The bonds have a par value of $1,000, a current price of $1,470, and mature in 12 years. What is the yield to maturity on these bonds?

Select one:

b.3.14%

c.2.63%

d.2.52%

e.2.71%

12) A Treasury bond has an 8% annual coupon and a 7.5% yield to maturity. Which of the following statements is CORRECT?

Select one:

a.The bond sells at a price below par.

b.The bond has a current yield greater than 8%.

c.The bond sells at a discount.

e.If the yield to maturity remains constant, the price of the bond will decline over time.

13) A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT?

Select one:

b.The bond's current yield exceeds its yield to maturity.

c.The bond's yield to maturity is greater than its coupon rate.

d.The bond's current yield is equal to its coupon rate.

e.If the yield to maturity stays constant until the bond matures, the bond's price will remain at $850.

14) Which of the following statements is CORRECT?

Select one:

a.One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.

c.If interest rates increase, all bond prices will increase, but the increase will be greater for bonds that have less price risk.

d.Relative to a coupon-bearing bond with the same maturity, a zero coupon bond has more price risk but less reinvestment risk.

e.Long-term bonds have less price risk and also less reinvestment risk than short-term bonds.

15) Which of the following statements is CORRECT?

Select one:

a.If two bonds have the same maturity, the same yield to maturity, and the same level of risk, the bonds should sell for the same price regardless of their coupon rates.

b.All else equal, an increase in interest rates will have a greater effect on the prices of short-term than long-term bonds.

d.If a bond's yield to maturity exceeds its coupon rate, the bond's price must be less than its maturity value.

e.If a bond's yield to maturity exceeds its coupon rate, the bond's current yield must be less than its coupon rate.

18) A 25-year, $1,000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $825. If the yield to maturity remains at its current rate, what will the price be 5 years from now?

Select one:

a.$801.76

c.$843.52

d.$835.17

e.$726.60