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1.A bond has a face value of $1,045, a coupon rate of 7% and 11 years until maturity. If similar bonds have an average yield

1.A bond has a face value of $1,045, a coupon rate of 7% and 11 years until maturity. If similar bonds have an average yield of 6%, what price would you expect to pay for this bond?

2.Bond investors will experience capital gains when

A.

more bonds are called than issued over a given period of time.

B.

market interest rates are high and falling.

C.

market interest rates are high and rising.

D.

the required rate of return exceeds the risk-free rate of return.

3.Unsecured bonds are backed by

A.

the issuer's good name.

B.

physical assets like real estate.

C.

financial assets held in trust by a third party.

D.

earnings from the project the debentures were issued to finance.

4.Bond investors will experience capital gains when

A.

more bonds are called than issued over a given period of time.

B.

market interest rates are high and falling.

C.

market interest rates are high and rising.

D.

the required rate of return exceeds the risk-free rate of return.

5

5.Mortgage Backed Securities are relatively safe investments EXCEPT

A.

when inflation is high.

B.

when home prices decline.

C.

when interest rates rise.

D.

when mortgage holders refinance frequently.

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