Question 1 (0.5 points) Saved Bonds issued in U.S. dollars by a U.S. firm but sold in other national markets are called a) foreign bonds Ob) indexed bonds Oc) convertible bonds O d) Eurobonds e) Yankee bonds Question 2 (0.5 points) Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $60 annually. Bond A will mature in 5 years, while bond B will mature in 10 years. If the yields to maturity on the two bonds change from 6% to 8%, O a) both bonds will increase in value but bond A will increase more than bond B Ob) both bonds will decrease in value but bond B will decrease more than bond A O c) both bonds will increase in value but bond B will increase more than bond A d) both bonds will decrease in value but bond A will decrease more than bond B e) both bonds will not change in value. Question 3 (0.5 points) A coupon bond that pays interest annually has a par value of $1,000, matures in five years, and has a yield to maturity of 6%. The intrinsic value of the bond today will be ----- if the coupon rate is 7%. a) $620.92 Ob) $886.28 Oc) $1,123.01 d) $1,042.12 e) $1,000.00 Question 4 (0.5 points) You buy a TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns out to be 2%, 3%, and 4% over the next 3 years. The total annual coupon income you will receive in year 3 is _ a) $30.6 Ob) $34.52 Oc) $32.78 Od) $30 e) $31.52 Question 5 (0.5 points) Saved Consider a 7-year bond with a 9% coupon and a yield to maturity of 12%. If interest rates remain constant, 1 year from now the price of this bond will be O a) higher Ob) the same c) indeterminate d) Lower Question 6 (0.5 points) A corporate bond has a 10-year maturity and pays interest semiannually. The quoted coupon rate is 6%, and the bond is priced at par. The bond is callable in 3 years at 110% of par. What is the bond's yield to call? a) 6.72% Ob) 4.49% OC) 6% d) 8.98% O e) 9.17% Question 7 (0.5 points) Saved What is the lowest grade a bond can receive and still be considered investment grade? O a) A O) AAA ) Od) e) Question 8 (0.5 points) A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at $915.62. The yield to maturity on this bond is O a) 8.12% b) 6% O c) 7.23% Od) 6.55% Oe) 9.45% Question 9 (0.5 points) The price of a bond (with par value of $1,000) at the beginning of a period is $980 and at the end of the period is $975. What is the holding-period return if the annual coupon rate is 4.5%? a) 4.08% b) 5.12% c) 5.60% O d) 4.59% e) 4.50% Question 10 (0.5 points) In an era of particularly low interest rates, which of the following statements is correct for callable bond? a) You should expect to earn YTC on par value bond. Ob) You should expect to earn YTC on discount bond. c) You should expect to earn YTC on premium bond. d) You should expect to earn YTM on premium bond. Question 11 (0.5 points) You buy a 3-year TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns out to be 2%, 3%, and 4% over the next 3 years. The par value you will receive in year 3 is. a) $1,050.60 Ob) $0 Oc) $1,000 d) $1,092.62 e) $1,100.00 Question 12 (0.5 points) Saved TIPS offer investors inflation protection by ___ by the inflation rate each year. a) increasing only the par value Ob) increasing the promised yield to maturity Oc) increasing only the coupon rate d) increasing only the coupon payment O e) increasing both the par value and the coupon payment Question 13 (0.5 points) Saved You can be sure that a bond will sell at a discount to par when a) its coupon rate is less than its yield to maturity b) its coupon rate is equal to or greater than its yield to maturity O C) its coupon rate is greater than its yield to maturity d) its coupon rate is equal to its yield to maturity O e) its yield to maturity remains constant over its life
