# Quiz 18: The Analysis and Valuation of Bonds

Anthropology

Q 1Q 1

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-For a bond the present value model incorporates both the coupon receipts and the capital gain or loss.

Free

True False

True

Q 2Q 2

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-The major problem facing a bond analyst is the ability to forecast the basic interest rate level since yield spreads are generally inconsequential.

Free

True False

False

Q 3Q 3

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-Yield to maturity and current yield are equal when the bond is selling for exactly par value.

Free

True False

True

Q 4Q 4

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-An interest rate is the price of loanable funds.

Free

True False

Q 5Q 5

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-The internal rate of return is that discount rate that sets the present value of cash flows from an investment equal to its par value.

Free

True False

Q 6Q 6

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-If an investor buys a high coupon bond, and rates then fall, the investor has "locked up" that high yield as a realized yield.

Free

True False

Q 7Q 7

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-The three major theories explaining the term structure of interest rates are the expectations hypothesis, the liquidity differential hypothesis, and the segmented quality hypothesis.

Free

True False

Q 8Q 8

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-The expectations hypothesis is also known as both the institutional theory and the hedging pressure theory.

Free

True False

Q 9Q 9

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-Bond price volatility varies directly with the term to maturity and directly with the coupon.

Free

True False

Q 10Q 10

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-The longer the time to maturity, the greater the percentage change in a bond's price.

Free

True False

Q 11Q 11

Exhibit 19.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds, both pay semiannual interest. Bond X has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8% per year, and a face value of $1000. Bond Y has a coupon of 7% per year, maturity of 20 years, yield to maturity of 8.5% per year, and a face value of $1000.
-There is an inverse relationship between duration and coupon.

Free

True False

Free

True False

Q 13Q 13

The fundamental determinants of interest rates are the real risk free rate, inflation, and the risk premium.

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True False

Q 14Q 14

Because you expect market interest rates to decline during the next four months, if you were offered two bonds with equal duration, you would select the one with the higher measure of convexity.

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True False

Q 15Q 15

According to the expectations hypothesis, a rising yield curve indicates that investors' demand for long maturity bonds is expected to rise.

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True False

Q 16Q 16

According to the segmented market hypothesis, yields for a particular maturity segment depend on supply and demand within the maturity segment.

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True False

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True False

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True False

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True False

Q 20Q 20

Convexity is a measure of how much a bond's price-yield curve deviates from the linear approximation of that curve.

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True False

Q 21Q 21

The price-yield curve is a concave curve representing the relationship of bond prices and yields.

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True False

Q 22Q 22

The realized yield measures the expected rate of return of a bond that you expect to sell prior to its maturity.

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True False

Q 23Q 23

The term structure of interest rates is a dynamic function that relates the term to maturity to the yield to maturity of bonds.

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True False

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True False

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True False

Q 26Q 26

The annual interest paid on a bond relative to its prevailing market price is called its ____.
A)Promised yield
B)Yield to maturity
C)Coupon rate
D)Effective yield
E)Current yield

Free

Multiple Choice

Q 27Q 27

If the holding period is equal to the term to maturity for a corporate bond the rate of discount represents the
A)Coupon yield.
B)Effective yield.
C)Yield to call.
D)Yield to maturity.
E)Reinvestment rate.

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Multiple Choice

Q 28Q 28

The nominal yield of a bond is the
A)Annual coupon as a percent of the current price.
B)Annual rate earned including the capital gain or loss.
C)Rate earned giving consideration to coupon reinvestment.
D)Coupon rate.
E)Promised yield to maturity.

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Multiple Choice

Q 29Q 29

If the coupon payments are not reinvested during the life of the issue then the
A)Promised yield is greater than the realized yield.
B)Promised yield is less than the realized yield.
C)Nominal yield declines.
D)Nominal yield is greater than the promised yield.
E)Current yield equals the yield to maturity.

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Multiple Choice

Q 30Q 30

The importance of the reinvestment assumption increases with a ____ coupon and a ____ term to maturity.
A)Low, short
B)Low, long
C)High, short
D)High, long
E)Zero, very long

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Multiple Choice

Q 31Q 31

The best way for an investor to "lock in" to high interest rates would be to purchase a bond that has a ____ coupon and a ____ term to maturity.
A)Low, short
B)Low, long
C)High, short
D)High, long
E)Zero, very long

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Multiple Choice

Q 32Q 32

The term structure of interest rates is a static function that relates the
A)Term to call and the yield to maturity.
B)Term to maturity and the yield to maturity.
C)Term to call and the yield to call.
D)Term to maturity and the coupon rate.
E)Term to maturity and the current yield.

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Multiple Choice

Q 33Q 33

The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value
A)Equal to or greater than par plus one year's interest.
B)Equal to par.
C)Equal to par less one year's interest.
D)Less than par.
E)Five percent over par.

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Multiple Choice

Q 34Q 34

Which of the following is not a major risk premium component for bond investors?
A)Quality differentials.
B)Term to maturity.
C)Indenture provisions.
D)Yield to maturity.
E)Exchange rate risk differences.

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Multiple Choice

Q 35Q 35

There are four major factors accounting for the existence of yield differentials. Which of the following is not a factor?
A)Segments
B)Sectors
C)Indentures
D)Coupons
E)Maturities

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Multiple Choice

Q 36Q 36

The convexity of a bond is affected as follows:
A)Positively with maturity.
B)Positively with yield.
C)Inversely with coupon.
D)Choices a and b
E)Choices a and c

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Multiple Choice

Q 37Q 37

Which of the following statements is true?
A)An inverse relationship exists between coupon and convexity.
B)A direct relationship exists between maturity and convexity.
C)An inverse relationship exists between yield and convexity.
D)Choices a and c only
E)All of the above statements are true

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Multiple Choice

Q 38Q 38

If you expected interest rates to fall, you would prefer to own bonds with
A)long durations and high convexity.
B)long durations and low convexity.
C)short durations and high convexity.
D)short durations and low convexity.
E)none of the above.

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Multiple Choice

Q 39Q 39

If you expected interest rates to fall, you would prefer to own bonds with
A)short maturities and low coupons.
B)long maturities and high coupons .
C)long maturities and low coupons.
D)short maturities and high coupons.
E)none of the above.

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Multiple Choice

Q 40Q 40

If you expected interest rates to rise, you would prefer to own bonds with
A)short maturities and low coupons.
B)long maturities and high coupons .
C)long maturities and low coupons.
D)short maturities and high coupons.
E)none of the above.

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Multiple Choice

Q 41Q 41

According to the liquidity preference hypothesis yield curves generally slope upward because
A)investors prefer short maturity obligations to long maturity obligations.
B)investors prefer long maturity obligations to short maturity obligations.
C)investors prefer less volatile long maturity obligations.
D)investors prefer more volatile short maturity obligations.
E)none of the above.

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Multiple Choice

Q 42Q 42

According to the segmented-market hypothesis a downward sloping yield curve indicates that
A)demand for long term bonds has fallen and demand for short term bonds has fallen.
B)demand for long term bonds has risen and demand for short term bonds has fallen.
C)demand for long term bonds has fallen and demand for short term bonds has risen.
D)demand for long term bonds has risen and demand for short term bonds has risen.
E)none of the above.

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Multiple Choice

Q 43Q 43

According to the segmented-market hypothesis a rising yield curve indicates that
A)demand for long term bonds has fallen and demand for short term bonds has fallen.
B)demand for long term bonds has risen and demand for short term bonds has fallen.
C)demand for long term bonds has fallen and demand for short term bonds has risen.
D)demand for long term bonds has risen and demand for short term bonds has risen.
E)none of the above.

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Multiple Choice

Q 44Q 44

According to the expectations hypothesis a rising yield curve indicates that investors expect
A)future short term rates to fall
B)future short term rates to rise
C)future long term rates to rise
D)future long term rates to fall
E)none of the above

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Multiple Choice

Q 45Q 45

Convexity is a desirable feature of bonds because.
A)As interest rates decline, the price of a low convexity bond decreases at a decreasing rate.
B)As interest rates decline, the price of a high convexity bond decreases at an increasing rate.
C)As interest rates decline, the price of a low convexity bond increases at a decreasing rate.
D)As interest rates decline, the price of a high convexity bond increases at an increasing rate.
E)As interest rates decline, the price of a high convexity bond decreases at a decreasing rate.

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Multiple Choice

Q 46Q 46

The position of a bondholder that is long a callable bond is equal to being
A)Long a noncallable bond + long a call option on the bond.
B)Long a noncallable bond + short a call option on the bond.
C)Short a noncallable bond + long a call option on the bond.
D)Short a noncallable bond + short a call option on the bond.
E)None of the above.

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Multiple Choice

Q 47Q 47

Option adjusted duration can be calculated as
A)Duration of noncallable bond duration of call option on the bond.
B)Duration of noncallable bond + duration of call option on the bond.
C)Duration of callable bond duration of call option on the bond.
D)Duration of callable bond + duration of call option on the bond.
E)None of the above.

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Multiple Choice

Q 48Q 48

The option adjusted duration will approach the duration to maturity, when
A)Interest rates are significantly above the coupon rate because the option has very little chance of being called, and the call option will have very little value.
B)Interest rates are significantly below the coupon rate because the option has very little chance of being called, and the call option will have very little value.
C)Interest rates are significantly above the coupon rate because the option has a high chance of being called, and the call option will have significant value.
D)Interest rates are significantly below the coupon rate because the option has a high chance of being called, and the call option will have significant value.
E)None of the above.

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Multiple Choice

Q 49Q 49

The promised yield to maturity calculation assumes that
A)All coupon interest payments are reinvested at the current market interest rate for the bond.
B)All coupon interest payments are reinvested at the coupon interest rate for the bond.
C)All coupon interest payments are reinvested at short term money market interest rates.
D)All coupon interest payments are not reinvested.
E)None of the above

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Multiple Choice

Q 50Q 50

If the coupon payments are not reinvested during the life of the issue then the
A)Promised yield is greater than realized yield.
B)Promised yield is less than realized yield.
C)Nominal yield declines.
D)Nominal yield is greater than promised yield.
E)Current yield equals the yield to maturity.

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Multiple Choice

Q 51Q 51

Consider a bond portfolio manager who expects interest rates to decline and has to choose between the following two bonds. Bond A: 10 years to maturity, 5% coupon, 5% yield to maturity
Bond B: 10 years to maturity, 3% coupon, 4% yield to maturity
A)Bond A because it has a higher coupon rate.
B)Bond A because it has a higher yield to maturity.
C)Bond B because it has a lower coupon rate.
D)Bond A or Bond B because the maturities are the same.
E)None of the above.

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Multiple Choice

Q 52Q 52

____ measures the expected rate of return of a bond assuming that you sell it prior to its maturity.
A)Yield to maturity
B)Current yield
C)Realized yield
D)Coupon rate
E)None of the above

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Multiple Choice

Q 53Q 53

The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value
A)Equal to or greater than par plus one year's interest.
B)Equal to par.
C)Equal to par less one year's interest.
D)Less than par.
E)Five percent over par.

Free

Multiple Choice

Q 54Q 54

Which of the following is not a risk premium component of bonds?
A)Bond quality
B)Term to maturity of the bond
C)Indenture provisions
D)Foreign bond risk
E)All of the above are risk premium components of bonds.

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Multiple Choice

Q 55Q 55

Which term-structure hypothesis suggests that any long-term interest rate simply represents the geometric mean of current and future on-year interest rates expected to prevail over the maturity of the issue?
A)Expectations hypothesis
B)Liquidity preference hypothesis
C)Segmented market hypothesis
D)Preferred habitat hypothesis
E)Hedging pressure hypothesis

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Multiple Choice

Q 56Q 56

Which of the four major yield spreads defines the difference in yields between pure government agency bonds and corporate bonds?
A)Segments
B)Sectors
C)Coupons
D)Seasoning
E)Maturity

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Multiple Choice

Q 57Q 57

All of the following are one of Malkiel's stated relationships between yield changes and bond prices except
A)Bond prices move inversely to bond yields.
B)Longer-maturity bonds experience larger price changes than shorter-maturity bonds.
C)Bond price volatility increases at a diminishing rate as term to maturity increases.
D)Bond price movements resulting from equal absolute increases or decreases in yield are symmetrical.
E)Bond price volatility is inversely related to the coupon rate.

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Multiple Choice

Q 58Q 58

Which duration is computed by discounting flows using the yield to maturity of the bond?
A)Effective
B)Macaulay Duration
C)Modified Duration
D)Present Value Duration
E)Cash Flow Duration

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Multiple Choice

Q 59Q 59

A graph of a bond's Price-Yield curve reveals all of the following except
A)Price moves inverse to yield
B)The bond sells at a premium when the yield is below the coupon rate
C)The bond sells at a discount when the yield is above the coupon rate
D)The Price-Yield curve in concave
E)All of the above are characteristics of the Price-Yield curve

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Multiple Choice

Q 60Q 60

Reinvestment risk is greatest for bonds that have
A)Short maturities and low coupon rates
B)Long maturities and high coupon rates
C)Short maturities and high coupon rates
D)Long maturities and low coupon rates
E)None of the above

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Multiple Choice

Q 61Q 61

Estimating forward rates from the spot rate curve is based on the assumption that the ____ hypothesis accurately describes the shape of the yield curve.
A)Expectations
B)Liquidity preference
C)Segmented market
D)Efficient market
E)None of the above

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Multiple Choice

Q 62Q 62

When there are no embedded options, ____ duration can be used to provide an approximation of the interest rate sensitivity of the bond.
A)Macaulay
B)Modified
C)Effective
D)Empirical
E)None of the above

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Multiple Choice

Q 63Q 63

Consider a 12%, 15 year bond that pays interest semiannually, and its current price is $675. What is the promised yield to maturity?
A)10.23%
B)18.45%
C)17.77%
D)2.31%
E)9.26%

Free

Multiple Choice

Q 64Q 64

Consider a 15%, 20 year bond that pays interest annually, and its current price is $850. What is the promised yield to maturity?
A)10.23%
B)18.45%
C)2.31%
D)17.77%
E)9.26%

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Multiple Choice

Q 65Q 65

Consider a 10%, 15 year bond that pays interest annually quarterly, and its current price is $1060. What is the promised yield to maturity?
A)10.23%
B)18.45%
C)2.31%
D)17.77%
E)9.26%

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Multiple Choice

Q 66Q 66

Consider a zero coupon bond that has a current price of $436.19 and matures in 10 years. What is its yield to maturity?
A)0.86%
B)8.65%
C)8.00%
D)58.80%
E)6.564%

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Multiple Choice

Q 67Q 67

What is the current price of a zero coupon bond with a 6% yield to maturity that matures in 15 years?
A)$4.17
B)$41.27
C)$417.27
D)$4,172.00
E)None of the above

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Multiple Choice

Q 68Q 68

What is the current price of a zero coupon bond with a 7% yield to maturity that matures in 20 years?
A)$1,000
B)$2,582
C)$25.82
D)$258.42
E)$100.00

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Multiple Choice

Q 69Q 69

Consider a bond with a 9% coupon and a current yield of 8 1/2%. What is this bond's price?
A)$1058.82
B)$1009.00
C)$1085.00
D)$1062.44
E)$1077.96

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Multiple Choice

Q 70Q 70

Consider a bond with a current yield of 8% and a price of $1,250. What is this bond's coupon?
A)8.0%
B)10.0%
C)11.0%
D)8.5%
E)9.6%

Free

Multiple Choice

Q 71Q 71

Consider a bond with a price of $944.44 and a coupon of 8 1/2%. What is the current yield?
A)9.4%
B)6.8%
C)8.6%
D)9.0%
E)11.0%

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Multiple Choice

Q 72Q 72

Suppose you have a 12%, 20 year bond traded at $850. If it is callable in 5 years at $1,100, what is the bond's yield to call? Interest is paid semiannually.
A)8%
B)9.0%
C)18.0%
D)9.4%
E)16.5%

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Multiple Choice

Q 73Q 73

Suppose you have a 15%, 25 year bond traded at $975. If it is callable in 5 years at $1050, what is the bond's yield to call? Interest is paid annually.
A)15%
B)16.5%
C)7.65%
D)8.52%
E)9.64%

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Multiple Choice

Q 74Q 74

Suppose you have a 10%, 20 year bond traded at $1,120. If it is callable in 5 years at $1,150, what is the bond's approximate yield to call? Interest is paid quarterly.
A)7.78%
B)8.00%
C)9.40%
D)9.36%
E)9.72%

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Multiple Choice

Q 75Q 75

Calculate the duration of a 6 percent, $1,000 par bond maturing in three years if the yield to maturity is 10 percent and interest is paid semiannually.
A)1.35 years
B)1.78 years
C)2.50 years
D)2.78 years
E)2.95 years

Free

Multiple Choice

Q 76Q 76

Calculate the modified duration for a 10-year, 12 percent bond with a yield to maturity of 10 percent and a Macaulay duration of 7.2 years.
A)6.43 years
B)6.55 years
C)6.79 years
D)6.86 years
E)7.01 years

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Multiple Choice

Q 77Q 77

A 12-year, 8 percent bond with a YTM of 12 percent has a Macaulay duration of 9.5 years. If interest rates decline by 50 basis points, what will be the percent change in price for this bond?
A)+4.48%
B)+4.61%
C)+8.48%
D)+8.96%
E)+17.92%

Free

Multiple Choice

Q 78Q 78

Consider a bond with a duration of 6 years having a yield to maturity of 8% and interest rates are expected to rise by 50 basis points. What is the percentage change in the price of the bond?
A)2.88%
B)3.45%
C)3.89%
D)3.45%
E)2.88%

Free

Multiple Choice

Q 79Q 79

If the price before yields changed was $950, what is the resulting price?
A)$922.64
B)$918.66
C)$1000.00
D)$968.50
E)$1012.45

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Multiple Choice

Q 80Q 80

Consider a bond with a duration of 7 years having a yield to maturity of 7% and interest rates are expected to rise by 50 basis points. What is the percentage change in the price of the bond?
A)3.62%
B)3.45%
C)3.38%
D)3.38%
E)3.62%

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Multiple Choice

Q 81Q 81

If the price before yields changed was $925, what is the resulting price?
A)$865.22
B)$918.66
C)$889.11
D)$1000.00
E)$1012.45

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Multiple Choice

Q 82Q 82

Consider a bond with a duration of 8 years having a yield to maturity of 8% and interest rates are expected to rise by 50 basis points. What is the percentage change in the price of the bond?
A)3.85%
B)3.45%
C)4.02%
D)3.45%
E)3.85%

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Multiple Choice

Q 83Q 83

If the price before yields changed was $975, what is the resulting price?
A)$937.46
B)$918.66
C)$965.55
D)$898.62
E)$1012.45

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Multiple Choice

Q 84Q 84

Suppose the current 6 year spot rate is 8% and the current 5 year spot rate is 7%. What is the one year forward rate in five years?
A)12.62%
B)11.58%
C)13.14%
D)14.65%
E)15.14%

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Multiple Choice

Q 85Q 85

Suppose the current 6 year rate is 9% and the current 5 year rate is 7%. What is the one year forward rate for five years?
A)19.57%
B)18.62%
C)15.80%
D)14.65%
E)12.67%

Free

Multiple Choice

Q 86Q 86

Assume that you purchase a 3-year $1,000 par value bond, with a 8% coupon, and a yield of 10%. After you purchase the bond, one-year interest rates are as follow, year 1 = 10%, year 2 = 8%, year 3 = 6% (these are the reinvestment rates). Calculate the realized horizon yield if you hold the bond to maturity. Interest is paid annually.
A)8.37%
B)7.28%
C)9.76%
D)10.67%
E)14.0%

Free

Multiple Choice

Q 87Q 87

Assume that you purchase a 10-year $1,000 par value bond, with a 12% coupon, and a yield of 9%. Immediately after you purchase the bond, yields fall to 8% and remain at that level to maturity. Calculate the realized horizon yield, if you hold the bond for 5 years and then sell. Interest is paid annually.
A)16.25%
B)12.15%
C)7.75%
D)10.05%
E)9.34%

Free

Multiple Choice

Q 88Q 88

Suppose the current 7 year rate is 8% and the current 6 year rate is 6%. What is the one year forward rate for six years?
A)16.33%
B)18.22%
C)20.82%
D)14.65%
E)15.14%

Free

Multiple Choice

Q 89Q 89

Assume that you purchase a 5-year $1,000 par value bond, with a 6% coupon, and a yield of 7%. Immediately after you purchase the bond, yields rise to 8% and remain at that level to maturity. Calculate the realized horizon yield if you hold the bond to maturity. Interest is paid annually.
A)6.0%
B)7.11%
C)8.0%
D)15.25%
E)8.18%

Free

Multiple Choice

Q 90Q 90

Estimate the percentage price change for a 5-year $1,000 par value bond, with a 6% coupon, if the yield rises from 8% to 8.5%. Interest is paid semiannually.
A)2.1%
B)2.1%
C)4.4%
D)4.4%
E)None of the above

Free

Multiple Choice

Q 91Q 91

Calculate the Macaulay duration for a 5-year $1,000 par value bond, with a 6% coupon and a yield to maturity of 8%. Interest is paid annually.
A)6.44 years
B)5.25 years
C)4.44 years
D)2.50 years
E)None of the above

Free

Multiple Choice

Q 92Q 92

A 15-year bond has a $1,000 par value bond, a 4% coupon and a yield to maturity of 3.3%. Interest is paid annually. The bond's current yield is
A)3.7%
B)4.0%
C)3.3%
D)7.3%
E)None of the above

Free

Multiple Choice

Q 93Q 93

A 5-year bond has a $1,000 par value bond, a 12% coupon and a yield to maturity of 8%. Interest is paid semiannually. The bond's price is
A)$864.65
B)$1081.78
C)$852.80
D)$1162.22
E)None of the above

Free

Multiple Choice

Q 94Q 94

A 15-year bond, purchased 5 years ago, has a $1,000 par value bond, a 10 percent coupon and a yield to maturity of 12%. Interest is paid annually. The bond's price is
A)$864
B)$887
C)$1152
D)$1123
E)None of the above

Free

Multiple Choice

Q 95Q 95

Exhibit 18.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
-Refer to Exhibit 18.1. Calculate the current price of the bond.
A)$1579.46
B)$918.89
C)$789.29
D)$1000
E)$743.29

Free

Multiple Choice

Q 96Q 96

Exhibit 18.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
-Refer to Exhibit 18.1. Calculate the Macaulay duration for the bond.
A)4.19 years
B)4.36 years
C)8.72 years
D)8.38 years
E)9.52 years

Free

Multiple Choice

Q 97Q 97

Exhibit 18.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
-Refer to Exhibit 18.1. Calculate the modified duration for the bond.
A)4.19 years
B)4.36 years
C)8.72 years
D)8.38 years
E)9.52 years

Free

Multiple Choice

Q 98Q 98

Exhibit 18.1
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 5 years to maturity and a 6% coupon has a yield to maturity of 8%. Interest is paid semiannually.
-Refer to Exhibit 18.1. Estimate the percentage price change for this 5-year $1,000 par value bond, with a 6% coupon, if the yield rises from 8% to 8.5%. Interest is paid semiannually.
A)2.1%
B)2.1%
C)4.4%
D)4.4%
E)None of the above

Free

Multiple Choice

Q 99Q 99

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Refer to Exhibit 18.2. What is the price of the Talmart corporate bonds?
A)$965.63
B)$966.13
C)$1,034.65
D)$1,135.10
E)$1,051.97

Free

Multiple Choice

Q 100Q 100

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Refer to Exhibit 18.2. What is the Macaulay duration of the Talmart corporate bonds?
A)3.43
B)3.64
C)3.76
D)3.85
E)4.11

Free

Multiple Choice

Q 101Q 101

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Refer to Exhibit 18.2. What is the Modified duration of the Talmart corporate bonds?
A)3.43
B)3.64
C)3.76
D)3.85
E)4.11

Free

Multiple Choice

Q 102Q 102

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Refer to Exhibit 18.2. If interest rates increase 50 basis points, what will be the approximate price change for the Talmart bond?
A)17.0%
B)1.7%
C)1.7%
D)1.8%
E)17.0%

Free

Multiple Choice

Q 103Q 103

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Calculate the modified duration of a bond that has a Macaulay duration of 7.6 and the bond pays interest semi-annually with a coupon rate of 6% and a required rate of return of 8%.
A)7.04
B)7.17
C)7.31
D)7.38
E)8.12

Free

Multiple Choice

Q 104Q 104

Exhibit 18.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Talmart Corporation bonds have a $1,000 face value and will mature in 4 years. The bonds have a 7% coupon rate. Interest is paid annually and the required rate of return is 6 percent for these bonds.
-Zappo Corporation just issued $1,000 face value bonds that will mature in 20 years and have a 7% coupon rate. Interest is paid semi-annually and the required rate of return is 9 percent for these bonds. The bonds have a 5 year call provision that will pay a call premium of $1,050 if they are called in. What is the price of the Zappo Corporation bond?
A)$815.98
B)$817.43
C)$826.35
D)$920.87
E)$953.07

Free

Multiple Choice

Q 105Q 105

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3. Calculate the current price of the bond.
A)$964.90
B)$965.35
C)$981.41
D)$1035.45
E)$1035.85

Free

Multiple Choice

Q 106Q 106

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3. Calculate the Macaulay duration for the bond.
A)3.19 years
B)3.36 years
C)3.57 years
D)3.72 years
E)3.84 years

Free

Multiple Choice

Q 107Q 107

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3. Calculate the modified duration for the bond.
A)3.51 years
B)3.61 years
C)3.72 years
D)4.38 years
E)7.44 years

Free

Multiple Choice

Q 108Q 108

Exhibit 18.3
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
A $1000 par value bond with 4 years to maturity and a 5% coupon has a yield to maturity of 6%. Interest is paid annually.
-Refer to Exhibit 18.3. Estimate the percentage price change for this 4-year $1,000 par value bond, with annual 5% coupon, if the yield falls from 6% to 5.5%.
A)3.50%
B)1.75%
C)1.75%
D)3.50%
E)None of the above

Free

Multiple Choice