QUESTION $1$

A bond that has a price of $$1080$ and a yield of $8\%$ must have a coupon rate that is $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$a bond that has a price of $$980$ and a yield of $8\%$

A$.$

higher than

B$.$

lower than

C$.$

equal to

$8\mathrm{.}3334$ points

QUESTION $2$

The coupon rate on a bond is $\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

A$.$

greater than the yield to maturity when the bond sells at a discount

B$.$

the same as the yield to maturity before the maturity date

C$.$

equal to the market$$s required return on the bond when the bond is selling at par value

D$.$

the bond$$s annual interest payment divided by the bond$$s price

$8\mathrm{.}3334$ points

QUESTION $3$

If you expect yields to rise, which bond should you choose?

Bond

Coupon Rate

YTM

Callable?

Time to maturity

A

$5\%$

$5\%$

NO

$2$ years

B

$5\mathrm{.}15\%$

$5\mathrm{.}15\%$

YES

$2$ years

A

B

A$=$B

$8\mathrm{.}3334$ points

QUESTION $4$

A bond that has a yield of $8\%$ and a coupon rate of $7\%,$ should have a $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ price than a bond that has a yield of $7\%$ and a coupon rate of $8\%.$

A$.$

higher

B$.$

lower

C$.$

equal

$8\mathrm{.}3334$ points

QUESTION $5$

Bond A has a yield to call of $4\mathrm{.}5\%.$ Bond B has a yield to call of $4\%.$ Both bonds are currently callable. If the yield to maturity on both bonds is $4\mathrm{.}25\%,$ which bond will be called?

A

B

A$=$B

Not enough information to determine.

$8\mathrm{.}3334$ points

QUESTION $6$

If yields decrease by $2\%,$ which bond will have the higher capital gain?

Bond

Coupon Rate

YTM

Callable?

Time to maturity

A

$5\%$

$5\%$

NO

$2$ years

B

$5\mathrm{.}15\%$

$5\mathrm{.}15\%$

YES

$2$ years

A

B

A$=$B

$8\mathrm{.}3334$ points

QUESTION $7$

Which of the following bonds is more likely to be called?

Callable Bond

Coupon Rate

YTM

Call Price

Time to call

A

$5\%$

$4\%$

$$1000$

$2$ years

B

$4\%$

$5\%$

$$1005$

$2$ years

A

B

A$=$B

Not enough information to determine.

$8\mathrm{.}3334$ points

QUESTION $8$

Bond A has an annual coupon of $$80.$ Bond B has a $10\%$ coupon rate. Both bond's yields are currently $10\%.$ All else equal, Bond A$$s holding period return will be the $\_\_\_\_\_\_\_\_\_\_\_\_$ Bond B$$s holding period return over the next year.

A$.$

higher than

B$.$

lower than

C$.$

equal to

$8\mathrm{.}3334$ points

QUESTION $9$

A bond that pays a $$125$ coupon annually and has a yield of $12\mathrm{.}5\%$ must have a price that is $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ a bond that has a yield of $8\%$ and pays a $$40$ coupon twice a year

A$.$

higher than

B$.$

lower than

C$.$

equal to

$8\mathrm{.}3334$ points

QUESTION $10$

A $5-$year zero$-$coupon bond must have a price that is $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$ a $10-$year zero$-$coupon bond.

A$.$

higher than

B$.$

lower than

C$.$

equal to

$8\mathrm{.}3334$ points

QUESTION $11$

All else equal, when yield to maturity decreases, bond value decreases.

True

False

$8\mathrm{.}3334$ points

QUESTION $12$

If yields remain constant, which of the following bonds will have a capital gain over the year?

Bond

Coupon Rate

YTM

Time to maturity

A

$4\%$

$5\%$

$5$ years

B

$5\%$

$5\%$

$5$ years

A

B

A$=$B

$8\mathrm{.}3334$ points