Which of the following bonds has the lowest interest rate risk

Q 5 :

A 15-year bond with a face value of $1000 and a 6% coupon rate A 3-year bond with a face value of $1000 and a 2% coupon rate A 12-year bond with a face value of $1000 and a 5% coupon rate A 7-year bond with a face value of $1000 and a 10% coupon rate

Q 6:

You a reviewing an investment and you expect that in 5-years time you will receive a return of $45,000 and you expect to receive this $45,000 per year for another 7 years beyond the first return (a total of 8 years of $45,000 in cash flows). Calculate the present value of these future cash flows. Assume a discount rate of 12%.

Q 7;

If you invest $2000 every quarter at an annual rate of 8% compounded quarterly, how much would you accumulate at the end of 30 years

Q 8 Which of the following statements regarding the similarities between ordinary shares and bonds is correct?

The value of both an ordinary share and a bond is equal to the present value of all future cash flows received to the security holder.

Both ordinary shares and bonds promise their owners interest income at some specified time in the future.

Both ordinary shares and bonds promise their holders a pre-determined constant income stream.

Both ordinary shares and bonds promise their owners a maturity payment at some specified time in the future.

Q 9:

Gate Ltd is a door manufacturer and there shares are listed on the stock exchange. The company last paid a dividend of $0.65 on its ordinary shares. The company's dividends are expected to grow at a constant rate of 3.5% per annum indefinitely. If the required rate of return is 15%, what is the current value of the share?

$5.85 $6.93 $6.70 $5.65

Q 10:

The yield to maturity on a bond is:

Is a fixed rate and only varies when interest rates go up.

ls the discount rate that discounts all future interest payments and the face value value of the bond to equal it's present value.

the expected return of the bond if held to its maturity date.

B and C

Question 11 (1 point) New anti pollution laws have caused a company to experience a decline in it's profit due to increases in compliance costs. The new law has only had a financial impact on a few companies. This risk can be viewed as:

Question 11 options:

unsystematic risk

diversifiable risk

All the listed options

independent risk

Question 12 (1 point) Which of the following are examples of unsystematic risk?

I. Risk the home-building industry declines due to a real estate slowdown.

II. Risk resulting from uncertainty regarding a possible strike against a specific company.

III. Risk resulting from a sharp downturn in the economy.

IV. Risk resulting from interest rate decreasing

Question 12 options:

II only

I, II

I, II, III, IV

I only

Question 13 (1 point) A 5-year bond pays a coupon of 7% on a face value of $1,000. If the yield to maturity is 7%, what is the market value of the bond?

Question 13 options:

over $1,200

exactly $1,000

over $1,000

under $1,000

Question 14 (1 point) Sleep Ltd's preference shares pay a perpetual fixed annual dividend of $1.60 per share. If the appropriate discount rate for this investment is 12%, what is the price of this share?

Question 14 options:

$13.33

$11.11

$15

cannot be determined without a maturity date.

You intend to borrow $50,000 over 4 years to purchase the latest model electric car. The loan must be repaid over 4 years (assuming equal repayments). The interest rate on the loan is 12% per annum, compounded monthly. What is the amount of each monthly repayment?

Question 15 options:

$1,316.69

$2,388.33

$2,554.50

$7,688.43

Question 16 (1 point) At what rate must $1050 be compounded for it to grow to $1500 in 7 years? Question 16 options:

4.2%

5.23%

5.96%

4.92%

Question 17 (1 point) You are looking to invest some savings at an annual rate of 5.0% that will compound every 4 months. The effective cost is as follows: Question 17 options:

5.10%

5.08%

5.2%

5.15%

Question 18 (1 point) Which of the following affect an asset's value to an investor? I. Amount of an asset's expected cash flows II. Timing of an asset's cash flows III. The asset's past cash flows IV. Investor's required rate of return Question 18 options:

I,III, IV

I, II,III,IV

I, II, IV

I, II ,Ill

Question 19 (1 point) An investor's required rate of return is a function of the following: Question 19 options:

risk premium the investors feel is necessary to compensate for the riskiness of the asset.

risk-free rate of interest plus the market risk premium

risk-free rate of interest plus a risk premium.

risk-free rate of interest plus an inflation premium

Question 20 (1 point) In terms of risk to the security holder, which of the following is least risky? Question 20 options:

ordinary shares of large companies

10-year government bonds

corporate bonds

ordinary shares of small companies

Question 21 (1 point) A $1,000 par value 10-year bond with a 10% coupon rate recently sold for $980. The yield to maturity is: Question 21 options:

cannot be determined due to insufficient data

greater than 10%

less than 10%

10%

Question 22 (1 point) The specified amount of interest paid by the issuer of a bond at periodic intervals is commonly called _____________________ and this rate can / is ______________________. Question 22 options:

face value; fixed

coupon: fixed

coupon: vary

face value; vary

Question 23 (1 point) Standard deviation measures the: Question 23 options:

systematic and unsystematic risk of a individual security

systematic risk of a individual security

unsystematic risk of a individual security

average return of an asset's returns

Question 24 (1 point) Callous Ltd bonds pay an annual coupon rate of 7%. If the investor's required rate of return falls below the annual coupon rate, the bonds will be priced at: Question 24 options:

par value

it cannot be determined from the information provided.

a premium to par value

a discount to par value

Question 25 (1 point) The process to calculate standard deviation is: Question 25 options:

Firstly, compute the average return, then compute the variance and lastly square root the variance.

Firstly, compute the average return, then compute the variance and lastly square root the standard deviation.

None of the listed options.

Firstly, compute the future returns, then compute the variance and lastly square root the variance.

Question 26 (1 point) All else equal, the present value of an ordinary share will be impacted positively by Question 26 options:

An increase in the required rate of return

An increase in the expected dividend growth rate

A decrease in the required rate of return

none of the listed options

Question 27 (1 point) Australia's central bank has decided to decrease interest rates as a result of softening economic conditions. This change in interest rates can be seen as what type of risk? Question 27 options:

unsystematic risk

market risk

diversifiable risk

Firm-specific risk

Question 28 (1 point) The issuer of a bond is unable to meet the financial commitments of the bond contract. This can be seen as an example of: Question 28 options:

The risk that the yield to maturity will decrease

Default risk

Interest rate risk

Both interest rate and default risk.

Question 29 (1 point) Interest rate risk can be best explained as follows: Question 29 options:

The risk that coupon payments will change when interest rates change.

Interest rate changes will cause the price of the bond to change.

The issuer of the bond is unable to meet the coupon payments of the bond.

None of options provided.