Choose the correct answer 1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which of the following statements is CORRECT?* O A. The bond sells at a price below par. O B. The bond has a current yield less than 10%. O C. The bond sells at a discount O D.A&C O E. None of the above. 2. J&J Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of $75. The market requires an interest rate of 8% on these bonds. What is the bond's price? * O A. $966.45 O B. $925.62 O C. $948.76 O D. $972.48 O E. None of the above. 3. Film Co. non-callable bonds currently sell for $1,150. They have a 10-year maturity, an annual coupon of $100, and a par value of $1,000. What is their yield to maturity?* O A. 5.84% O B. 6.15% O C. 6.47% O D. 7.91% O E. None of the above. PT |- |- P. Tam REIN525 Cours pdf 4. Tosh. Inc.'s bonds currently sell for $980 and have a par value of $1,000. They pay a $95 annual coupon and have a 12-year maturity, but they can be called in 3 years at $1,150. What is their yield to call (YTC)? * O A. 13.9% O B. 14% O c. 7.12% O D. 14.24% O E. None of the above. 5. TNT Inc. bonds currently sell for $1,100. They have a 5-year maturity, an annual coupon of $85, and a par value of $1,000. What is their current yield? * O A. 7.73% O B.7.50% O C. 7.91% O D. 8.12% O E. None of the above. 6. OSM Co. bonds have a 15-year maturity, an 8.4% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 6.40%, based on semiannual compounding. What is the bond's price? * O A. $1,047.19 O B. $1,074.05 O c. $1,191.03 O D. $1,129.12 O E. None of the above. 7. An annual-pay, 4% coupon, 10-year bond has a yield to maturity of 5.2%. If the price of this bond is unchanged two years later, its yield to maturity at that time is: * O A. 5.2% O B. less than 5.2%. O c. greater than 5.2%. O D. Cannot be determined. O E. None of the above. 8. One year ago, an investor purchased a 10-year, $1,000 par value, 8% semiannual coupon bond with an 8% yield to maturity. Now, one year later, interest rates remain unchanged at 8%. If the investor sells the bond today (immediately after receiving the second coupon payment, and with no transaction costs), he will have: * O A. a capital gain of $80. O B. a capital loss of $80. O C. no capital gain or loss. O D. cannot be determined. O E. None of the above. 9. Kelly Inc's 5-year bonds yield 7.50% and 5-year T-bonds yield 4.90%. The real riskfree rate is r* = 2.5%, the default risk premium for Kelly's bonds is DRP = 0.40%, the liquidity premium on Kelly's bonds is LP = 2.2% versus zero on T- bonds, and the inflation premium (IP) is 1.5%. What is the maturity risk premium (MRP) on all 5-year bonds? * O A. 0.73% O B. 0.81% O C. 0.90% O D. 0.99% O E. None of the above. 10. Niendorf Corporation's 5-year bonds yield 8.00%, and 5-year T-bonds yield 4.80%. The real risk-free rate is r* = 2.75%, the inflation premium for 5-year bonds is IP = 1.65%, the default risk premium for Niendorf's bonds is DRP = 1.20% versus zero for T-bonds, and the maturity risk premium for all bonds is found with the formula MRP = (t - 1) * 0.1%, where t = number of years to maturity. What is the liquidity premium (LP) on Niendorf's bonds? * O A. 2.00% B. 1.31% O C. 1.46% O D. 1.62% O E. None of the above. 11. An investor places $5,000 in an account. The stated annual interest rate is 6% compounded monthly. The value of the account at the end of three years is closest to: * O A. $5,970. O B. $5,978. O C. $5,983 O D. $5,980. O E. None of the above. 12. If an investment of $4,000 will grow to $6,250 in four years with monthly compounding, the annual interest rate will be closest to: O A. 11.2% O B.12.3%. O C. 13.0%. O D. 14.0% O E. None of the above. 13. Frank Jones is considering three separate investments. Investment 1 pays a stated annual interest rate of 6.1%, compounded annually. Investment 2 pays a stated annual interest rate of 6.0%, compounded monthly. Investment 3 pays a stated annual interest rate of 5.9%, compounded quarterly. Which investment should smith choose? * O A. Investment 1. O B. Investment 2. O C. Investment 3. O D. Indifferent between the three investments. O E. None of the above. 14. You have a saving account in the bank that pays you a rate of 8% compounded annually. If you deposit $750 at the end of the first year, $1,000 at the end of the second year, and $2,000 at the end of the fourth year, what will be the ending balance of your account at the end of the fourth year? * O A. $3,750.00 O B. $4,111.18 O C. $41,118.11 O D. Cannot be determined. O E. None of the above. 15. You have a chance to buy an annuity that pays $20,000 at the beginning of each year for 6 years. You could earn 5% on your money in other investments with equal risk. What is the most value in the present you should pay for the annuity? * O A. $106,589.53 O B. $120,000.00 O C. $126,000.00 O D. $162,000.00 O E. None of the above. 16. Assume that you purchase a 6-year, 8% savings certificate for $1,000. If interest is compounded annually, what will be the value of the certificate when it matures? * O A. $630.17 O B. $1,469.33 O C. $1,677.10 O D. $1,586.87 O E. None of the above. 17. Suppose you make 5 annual deposits of $1,000 in a savings account paying 6% compounded annually. The deposits are made at the beginning of each year. What amount would be in your account in year 5?* O A. $6,691.13 O B. $5,637.09 O C. $1,338.23 O D. $5,975.32 O E. None of the above. 18. An investor wants to receive $10,000 annually for ten years with the first payment five years from today. If the investor can earn a 14% annual return, the amount that she will have today is closest to: O A. $27,091. O B. $30,884 O C. $52,161 O D. $40,000 O E. None of the above. 19. Five years ago, an investor borrowed $5,000 from a financial institution that charged a 6% annual interest rate, and he immediately took his family to live in Nepal. He made no payments during the time he was away. When he returned, he agreed to repay the original loan plus the accrued interest by making five end- of-year payments starting one year after he returned. If the interest rate on the loan is held constant at 6% per year, what annual payment must the investor make in order to retire the loan? * O A. $1,338.23 O B. $1,588.45. O C. $1,638.23. O D. Cannot be determined. O E. None of the above. 20. Three years from now, an investor will deposit the first of eight $1,000 payments into a special fund. The fund will earn interest at the rate of 5% per year until the third deposit is made. Thereafter, the fund will return a reduced interest rate of 4% compounded annually until the final deposit is made. How much money will the investor have in the fund at the end of ten years assuming no withdrawals are made?* O A. $8,872.93 O B. $9,251.82. O C. $9,549.11. O D. Cannot be determined. O E. None of the above