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Currently,the bond market requires a return of 11.6 percent on the 10-year bonds issued by Winston Industries.The 11.6 percent is referred to as which one of the following?


A) coupon rate
B) face rate
C) call rate
D) yield to maturity
E) interest rate

F) C) and D)
G) A) and B)

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-Collingwood Homes has a bond issue outstanding that pays an 8.5 percent coupon and matures in 16.5 years.The bonds have a par value of $1,000 and a market price of $944.30.Interest is paid semiannually.What is the yield to maturity? A) 8.36 percent B) 8.42 percent C) 8.61 percent D) 8.74 percent E) 9.16 percent -Collingwood Homes has a bond issue outstanding that pays an 8.5 percent coupon and matures in 16.5 years.The bonds have a par value of $1,000 and a market price of $944.30.Interest is paid semiannually.What is the yield to maturity? A) 8.36 percent B) 8.42 percent C) 8.61 percent D) 8.74 percent E) 9.16 percent -Collingwood Homes has a bond issue outstanding that pays an 8.5 percent coupon and matures in 16.5 years.The bonds have a par value of $1,000 and a market price of $944.30.Interest is paid semiannually.What is the yield to maturity?


A) 8.36 percent
B) 8.42 percent
C) 8.61 percent
D) 8.74 percent
E) 9.16 percent

F) A) and D)
G) C) and D)

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A Treasury bond is quoted as 99:18 asked and 99:09 bid.What is the bid-ask spread in dollars on a $5,000 face value bond?


A) $0.03
B) $0.63
C) $11.00
D) $14.06
E) $16.25

F) C) and E)
G) A) and B)

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Which of the following correctly describe U.S.Treasury bonds? I.have a "tick" size of 1/32 II.highly liquid III.quoted in dollars and cents IV.quoted at the dirty price


A) I and II only
B) I and IV only
C) II and III only
D) II and IV only
E) I,II,and III only

F) B) and E)
G) A) and D)

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Which one of the following premiums is compensation for expected future inflation?


A) default risk
B) taxability
C) liquidity
D) inflation
E) interest rate risk

F) A) and E)
G) A) and D)

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D

Which of the following increase the price sensitivity of a bond to changes in interest rates? I.increase in time to maturity II.decrease in time to maturity III.increase in coupon rate IV.decrease in coupon rate


A) II only
B) I and III only
C) I and IV only
D) II and III only
E) II and IV only

F) B) and C)
G) A) and E)

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C

-Define liquidity risk,default risk,and taxability risk and explain how these risks relate to bonds and bond yields. -Define liquidity risk,default risk,and taxability risk and explain how these risks relate to bonds and bond yields. -Define liquidity risk,default risk,and taxability risk and explain how these risks relate to bonds and bond yields.

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Liquidity risk is the inability to quick...

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The interest rate risk premium is the:


A) additional compensation paid to investors to offset rising prices.
B) compensation investors demand for accepting interest rate risk.
C) difference between the yield to maturity and the current yield.
D) difference between the market interest rate and the coupon rate.
E) difference between the coupon rate and the current yield.

F) All of the above
G) C) and D)

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You are trying to compare the present values of two separate streams of cash flows which have equivalent risks.One stream is expressed in nominal values and the other stream is expressed in real values.You decide to discount the nominal cash flows using a nominal annual rate of 8 percent.What rate should you use to discount the real cash flows?


A) 8 percent
B) EAR of 8 percent compounded monthly
C) comparable risk-free rate
D) comparable real rate
E) You cannot compare the present values of these two streams of cash flows.

F) A) and B)
G) A) and C)

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-The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds? A) 1.60 percent B) 2.37 percent C) 6.32 percent D) 6.49 percent E) 6.88 percent -The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?


A) 1.60 percent
B) 2.37 percent
C) 6.32 percent
D) 6.49 percent
E) 6.88 percent

F) C) and D)
G) A) and E)

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A Treasury bond is quoted at a price of 101:14 with a current yield of 7.236 percent.What is the coupon rate?


A) 7.20 percent
B) 7.28 percent
C) 7.30 percent
D) 7.34 percent
E) 7.39 percent

F) B) and C)
G) B) and E)

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D

-Today,you want to sell a $1,000 face value zero coupon bond you currently own.The bond matures in 4.5 years.How much will you receive for your bond if the market yield to maturity is currently 5.33 percent? Ignore any accrued interest. A) $696.60 B) $698.09 C) $741.08 D) $756.14 E) $789.22 -Today,you want to sell a $1,000 face value zero coupon bond you currently own.The bond matures in 4.5 years.How much will you receive for your bond if the market yield to maturity is currently 5.33 percent? Ignore any accrued interest.


A) $696.60
B) $698.09
C) $741.08
D) $756.14
E) $789.22

F) B) and E)
G) B) and C)

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A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030,plus any accrued interest.The additional $30 is called which one of the following?


A) dirty price
B) redemption value
C) call premium
D) original-issue discount
E) redemption discount

F) C) and E)
G) B) and E)

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The liquidity premium is compensation to investors for:


A) purchasing a bond in the secondary market.
B) the lack of an active market wherein a bond can be sold for its actual value.
C) acquiring a bond with an unfavorable tax status.
D) redeeming a bond prior to maturity.
E) purchasing a bond that has defaulted on its coupon payments.

F) A) and C)
G) C) and D)

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-A 16-year,4.5 percent coupon bond pays interest annually.The bond has a face value of $1,000.What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent? A) 2.14 percent decrease B) 1.97 percent decrease C) 0.21 percent increase D) 1.97 percent increase E) 2.14 percent increase -A 16-year,4.5 percent coupon bond pays interest annually.The bond has a face value of $1,000.What is the percentage change in the price of this bond if the market yield to maturity rises to 5.7 percent from the current rate of 5.5 percent?


A) 2.14 percent decrease
B) 1.97 percent decrease
C) 0.21 percent increase
D) 1.97 percent increase
E) 2.14 percent increase

F) D) and E)
G) A) and B)

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Interest rates that include an inflation premium are referred to as:


A) annual percentage rates.
B) stripped rates.
C) effective annual rates.
D) real rates.
E) nominal rates.

F) A) and E)
G) C) and D)

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The specified date on which the principal amount of a bond is payable is referred to as which one of the following?


A) coupon date
B) yield date
C) maturity
D) dirty date
E) clean date

F) C) and E)
G) C) and D)

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-Roadside Markets has a 6.75 percent coupon bond outstanding that matures in 10.5 years.The bond pays interest semiannually.What is the market price per bond if the face value is $1,000 and the yield to maturity is 7.2 percent? A) $899.80 B) $899.85 C) $903.42 D) $967.24 E) $1,007.52 -Roadside Markets has a 6.75 percent coupon bond outstanding that matures in 10.5 years.The bond pays interest semiannually.What is the market price per bond if the face value is $1,000 and the yield to maturity is 7.2 percent?


A) $899.80
B) $899.85
C) $903.42
D) $967.24
E) $1,007.52

F) B) and C)
G) All of the above

Correct Answer

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Bond S is a 4 percent coupon bond.Bond T is a 10 percent coupon bond.Both bonds have 11 years to maturity,make semiannual payments,and have a yield-to-maturity of 7 percent.If interest rates suddenly rise by 2 percent,what will the percentage change in the price of Bond T be?


A) -15.16 percent
B) -14.87 percent
C) -13.56 percent
D) -12.92 percent
E) -12.67 percent

F) B) and D)
G) B) and C)

Correct Answer

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As a bond's time to maturity increases,the bond's sensitivity to interest rate risk:


A) increases at an increasing rate.
B) increases at a decreasing rate.
C) increases at a constant rate.
D) decreases at an increasing rate.
E) decreases at a decreasing rate.

F) B) and E)
G) C) and E)

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