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Name Quiz 11/20/2018 FINC3310 1- T F US bond market is larger in size (market value) than the stock market 2. TF Bond market is generally less liquid than the stock market F Treasury securities are usually considered free of default risk. T What is the principal amount of a bond that is repaid at the end of the loan term called? A coupon 8. market price C. maturity 4. face value $1,000, and pays semiannual coupon payments. What is the amount of each coupon payment? A. $30.00 B. $35.00 C. $65.00 D. $70.00 6. Which of the following refers to the coupon bond's rate of return that is required by the marketplace? A. Coupon rate 8. Yield to maturity C. Dirty yield D. Current yield 7. A bond dealer determines that the present value of a particular Treasury note (a type of coupon bond), based on Treasury spot rates, is greater than its market price. Assuming no transactions costs, the dealer can generate an arbitrage profit by (choose the best answer): A buying the Treasury note to strip it and selling the package of zero-coupon Treasury bonds 8. buying the equivalent Treasury STRIPS to recorstitute them and selling them as a Treasury note C. buying the Treasury note and shortselling the equivalent package of zero-coupon Treasury bonds D. either A or C 8. Ifintermediate-term, default-free, pure discount bonds have a lower rate of return than either the comparable ausan cen shorter-term or longer-term bonds, the term structure of interest rates will be: A. upward sloping B. humped C. U-shape D. downward sloping Suppose, you are a bond analyst, collecting the following information of treasury securities today: +1-year spot rate 5.263% +2-year spot rate 8.465% Bond Z is a 2-year bond with an annual coupon of 8% If bond Z is priced fairly at $994 today, its YTM is most accurately estimated to be A. 8.465%