Circle the right answer: 1. A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity (market rate) of 10%. The intrinsic value of the bond today will be __ if the coupon rate is 7%. A) $712.99 B) $620.92 C) $1,123.01 D) $886.28 E) $1,000.00

2. A coupon bond that pays interest annually, has a par value of $1,000, matures in 5 years, and has a yield to maturity (market rate) of 10%. The intrinsic value of the bond today will be ___ if the coupon rate is 12%. A) $922.77 B) $924.16 C) $1,075.82 D) $1,177.20 E) None of the above

3. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity (market rate) of 10%. The intrinsic value of the bond today will be ____ if the coupon rate is 8%. A) $922.78 B) $924.16 C) $1,075.80 D) $1,077.20 E) None of the above 4. You purchased an annual interest coupon bond one year ago that now has 6 years remaining until maturity. The coupon rate of interest was 10% and par value was $1,000. At the time you purchased the bond, the yield to maturity (market rate) was 8%. The amount you paid for this bond one year ago was A) $1,057.50. B) $1,075.50. C) $1,088.50. D) $1.092.46. E) $1,104.13.

5. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity (market rate) on the two bonds change from 12% to 10%, ____. A) Both bonds will increase in value, but bond A will increase more than bond B B) Both bonds will increase in value, but bond B will increase more than bond A C) Both bonds will decrease in value, but bond A will decrease more than bond B D) Both bonds will decrease in value, but bond B will decrease more than bond A E) None of the above

6. A zero-coupon bond has a yield to maturity (market rate) of 9% and a par value of $1,000. If the bond matures in 8 years, the bond should sell for a price of ___ today. A) 422.41 B) $501.87 C) $513.16 D) $483.49 E) None of the above

7. Which one of the following statements about convertibles is true? A) The longer the call protection on a convertible, the less the security is worth. B) The more volatile the underlying stock, the greater the value of the conversion feature. C) The smaller the spread between the dividend yield on the stock and the yield-to-maturity on the bond, the more the convertible is worth. D) The collateral that is used to secure a convertible bond is one reason convertibles are more attractive than the underlying stock. E) Convertibles are not callable.

8. The bond indenture includes A) The coupon rate of the bond. B) The par value of the bond. C) The maturity date of the bond. D) all of the above. E) None of the above.

9. Convertible bonds A) Give their holders the ability to share in price appreciation of the underlying stock. B) Offer lower coupon rates than similar nonconvertible bonds. C) Offer higher coupon rates than similar nonconvertible bonds. D) Both A and B are true. E) Both A and C are true.

10. Consider two bonds, F and G. Both bonds presently are selling at their par value of $1,000. Each pays interest of $90 annually. Bond F will mature in 15 years while bond G will mature in 26 years. If the yields to maturity on the two bonds change from 9% to 10%, ____. A) Both bonds will increase in value, but bond F will increase more than bond G B) Both bonds will increase in value, but bond G will increase more than bond F C) Both bonds will decrease in value, but bond F will decrease more than bond G D) Both bonds will decrease in value, but bond G will decrease more than bond F E) None of the above