A bond with an 11% coupon is issued at its face value of $1,000. What will the bond's value be if the required return of bond investors immediately increased to 14% if the bond had an original maturity of 1 year? 20 years?

a. They would each decline about $100 in value.

b. $973.68 and $801.31, respectively, for a one year and 20 year bond.

c. $1,000.00 and $1,000.00, respectively, for a one year and 20 year bond.

d. $972.88 and $800.02, respectively for a one year and 20 year bond.

In how many years will a bond mature, given its current price of $948, face value of $1,000, coupon of 8.5%, and required return of 10.3%?

a. 3.52 years

b. 10.1 years

c. 7.03 years

d. 4.1 years

Of the five categories discussed in class, _____ bonds are the safest, and thus would offer investors the _____ yield, or rate of return.

a. Junk, highest

b. Mortgage, lowest

c. Debentures, lowest

d. Mortgage, highest

Two bonds are being evaluated. Bond Y is currently trading for $980, and Bond Z is trading for $1,250. What is true of these bond investments?

a. They are both trading at a premium

b. They are both trading at a discount

c. Y is trading at a premium, and Z is trading at a discount

d. Y is trading at a discount, and Z is trading at a premium