1. Zero coupon bonds typically pay interest;

a. annually

b. semiannually

c. quarterly

d. none of these

2. Zero coupon bonds usually sell;

a. at a premium

b. at a discount

c. at par value

d. at face value

3. The current price of a zero coupon bond depends on;

a. market rates of interest

b. risk

c. par value

d. all of these

4. If the market rate of interest goes up, the value of a zero coupon bond will .

a. increase

b. decrease

c. stay the same

d. there is not enough information to tell

5. Coupon bonds are also commonly known as:

a. floating rate bonds

b. LIBOR bonds

c. Treasury bills

d. none of these

6. All of the following are possible features of coupon bonds except;

a. coupon bonds can be convertible

b. coupon bonds can be callable

c. coupon bonds can be zero interest

d. all of these are possible features of coupon bonds - coupon bonds can be convertible, callable and zero interest.

7. How much interest will a 7% coupon $1,000 par value bond pay annually when the market rate of interest on similar risk bonds is 9%? Assume semi-annual interest payments.

a. $70 a year

b. $90 a year

c. $70 every six months

d. $90 every six months

8. If an investor pays $1,021 for an 8% coupon $1,000 par value bond and holds it for 7 years until it matures, the investor