Question 6

Adams Enterprises' noncallable bonds currently sell for $910. They have a 15-year maturity, an annual coupon of $85, and a par value of $1,000. What is their yield to maturity?

Select one:

a.7.34%

b.9.66%

c.8.60%

d.9.95%

e.11.21%

Question 7

An investor is considering buying one of two 10-year, $1,000 face value, noncallable bonds: Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have a yield to maturity of 8%, and the YTM is expected to remain constant for the next 10 years. Which of the following statements is CORRECT?

Select one:

a.Bond B has a higher price than Bond A today, but one year from now the bonds will have the same price.

b.One year from now, Bond A's price will be higher than it is today.

c.Bond A's current yield is greater than 8%.

d.Bond A has a higher price than Bond B today, but one year from now the bonds will have the same price.

e.Both bonds have the same price today, and the price of each bond is expected to remain constant until the bonds mature.

Question 8

Bond A has a 9% annual coupon, while Bond B has a 7% annual coupon. Both bonds have the same maturity, a face value of $1,000, an 8% yield to maturity, and are noncallable. Which of the following statements is CORRECT?

Select one:

a.Bond A's capital gains yield is greater than Bond B's capital gains yield.

b.Bond A trades at a discount, whereas Bond B trades at a premium.

c.If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will be higher than it is today, but Bond B's price one year from now will be lower than it is today.

d.If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value.

e.Bond A's current yield is greater than that of Bond B.

Question 9

Dyl Inc.'s bonds currently sell for $870 and have a par value of $1,000. They pay a $65 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,100. What is their yield to maturity (YTM)?

Select one:

a.8.02%

b.9.71%

c.6.66%

d.7.38%

e.8.66%

Question 10

If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value?

Select one:

a.A 1-year zero coupon bond.

b.A 1-year bond with an 8% coupon.

c.A 10-year bond with an 8% coupon.

d.A 10-year bond with a 12% coupon.

e.A 10-year zero coupon bond.