You own a bond of the XYZ Corporation. Yesterday after the market closed the company CEO revealed that the firm was being investigated for accounting irregularities. The perceived credit quality of the company has deteriorated due to the announcement. What would you expect to happen to the price of the bond?

A) It would fall because the yield will fall

B) It would fall because the yield will rise

C) It would rise because the yield will fall

D) None of the above

What is the price of a three-year treasury bond with a par value of 100 and a coupon of 4.25% and a yield of 4.75%?

A) 100

B) 99.95

C) 98.62

D) None of the above

A treasury bond that had an original maturity of 30 years was issued at par in December of last year. The coupon is 9% and the yield is currently 8.2%. Will this bond currently be trading at a premium, discount, par value or unchanged price from when it was issued?

A) It will be trading at an unchanged price

B) It will be trading at a par

C) It will be trading at a discount

D) It will be trading at a premium

A bond is priced at 95 and has a coupon rate 9% and a yield of 7%. Is this bond priced correctly?

A) Yes, it is priced correctly because the buyer should pay a discount due to the higher than yield coupon rate.

B) Yes, it is priced correctly because the buyer should pay a discount due to the lower than yield coupon rate.

C) No, it is not priced correctly because the buyer should pay a discount due to the higher than yield coupon rate.

D) No, it is not priced correctly because the buyer should pay a premium due to the higher than yield coupon rate.