# Quiz 6: Pricing Fixed-Income Securities

Business

Q 1Q 1

If a bond is selling at a discount, then:
A)the yield to maturity is less than the coupon rate.
B)the yield to maturity is greater than the coupon rate.
C)the yield to maturity is equal to the coupon rate.
D)its duration must be greater than its maturity.
E)its duration must be equal to its maturity.

Free

Multiple Choice

B

Q 2Q 2

If a bond is selling at a premium, then:
A)the yield to maturity is less than the coupon rate.
B)the yield to maturity is greater than the coupon rate.
C)the yield to maturity is equal to the coupon rate.
D)its duration must be greater than its maturity.
E)its duration must be equal to its maturity.

Free

Multiple Choice

A

Q 3Q 3

If a bond is selling at par value, then:
A)the yield to maturity is less than the coupon rate.
B)the yield to maturity is greater than the coupon rate.
C)the yield to maturity is equal to the coupon rate.
D)its duration must be greater than its maturity.
E)its duration must be equal to its maturity.

Free

Multiple Choice

C

Q 4Q 4

To the nearest dollar, what is the value today of an investment that pays $15,000 in seven years, assuming an annual opportunity cost of 9%?
A)$7,473
B)$27,421
C)$8,206
D)$7,130
E)None of the above

Free

Multiple Choice

Q 5Q 5

To the nearest dollar, what is the value today of an investment that pays $10,000 in five years, assuming an annual opportunity cost of 6%?
A)$7,473
B)$11,592
C)$8,626
D)$7,130
E)None of the above

Free

Multiple Choice

Q 6Q 6

To the nearest dollar, what is the value today of an investment that pays $1,000,000 in 15 years, assuming an annual opportunity cost of 8%?
A)$555,265
B)$315,242
C)$463,193
D)$3,238,387
E)None of the above

Free

Multiple Choice

Q 7Q 7

If you invested $700 today and another $1,000 in two years, to the nearest dollar, how much will your investment be worth in seven years.? Assume an 8.4% annual compound return.
A)$616
B)$749
C)$1,364
D)$2,728
E)None of the above

Free

Multiple Choice

Q 8Q 8

How long will it take you to double your money if you can invest at 7.2% per year?
A)9.97 years
B)9.28 years
C)8.62 years
D)7.21 years
E)6.98 years

Free

Multiple Choice

Q 9Q 9

If you invested $200 today, another $400 in one year, and another $600 in two years, how much will your investment be worth (to the nearest dollar) in five years, assuming a 7% annual compound return?
A)$1,540
B)$600
C)$720
D)$770
E)None of the above

Free

Multiple Choice

Q 10Q 10

You invested $10,000 ten years ago.During the first two years, you earned 9% per year and during the last eight years, you earned 12% per year.To the nearest dollar, how much is your investment worth today?
A)$25,937
B)$29,417
C)$37,014
D)$40,456
E)None of the above

Free

Multiple Choice

Q 11Q 11

At what annual interest rate will you double your money if you invest for 8 years?
A)10.11%
B)9.05%
C)8.19%
D)7.91%
E)6.73%

Free

Multiple Choice

Q 12Q 12

What is the effective annual rate of an investment that offers 8%, compounded quarterly?
A)8.00%
B)8.16%
C)8.24%
D)8.32%
E)8.64%

Free

Multiple Choice

Q 13Q 13

What is the effective annual cost of a credit card that charges 18%, compounded monthly?
A)16.63%
B)18.00%
C)18.81%
D)19.56%
E)19.61%

Free

Multiple Choice

Q 14Q 14

A bank quotes you a rate of 7% on a CD, compounded quarterly.What is the effective annual rate?
A)6.79%
B)6.81%
C)6.87%
D)7.13%
E)7.19%

Free

Multiple Choice

Q 15Q 15

A bank quotes you an effective annual rate of 10% on a semi-annual investment.What is the annual simple interest rate?
A)9.76%
B)10.00%
C)10.25%
D)10.79%
E)10.96%

Free

Multiple Choice

Q 16Q 16

A bond with a par value of $1,000 and a 10% semi-annual coupon rate has 9 years to maturity.Assuming it is priced to yield 8%, compounded semi-annually, what is the market price of the bond, to the nearest dollar?
A)$1,074
B)$1,127
C)$1,450
D)$1,510
E)None of the above

Free

Multiple Choice

Q 17Q 17

A bond with a par value of $1,000 and a 13% semi-annual coupon rate has 20 years to maturity.Assuming it is priced to yield 10%, compounded semi-annually, what is the market value of the bond, to the nearest dollar?
A)$1,187
B)$1,107
C)$1,257
D)$2,373
E)None of the above

Free

Multiple Choice

Q 18Q 18

In January, you purchased a 14% semi-annual coupon bond ($1,0000 par) that had a remaining maturity of five years for $827.95.Six months later, immediately following an interest payment, you sold the bond.At the time of the sale, interest rates were 10%.What was your return?
A)7.1%
B)38.2%
C)46.4%
D)146.4%
E)296.3%

Free

Multiple Choice

Q 19Q 19

You purchase a 10-year bond at face value for $1,000.It pays a semi-annual coupon payment of $50.If you can reinvest the coupon payments at 8% annually, what is your expected total return?
A)5.73%
B)6.63%
C)7.53%
D)8.43%
E)9.33%

Free

Multiple Choice

Q 20Q 20

Assuming an 8% return, compounded semi-annually, what is the market value of a 12% coupon bond with three years to maturity?
A)$1,000.00
B)$1,104.84
C)$1,419.68
D)$1,809.35
E)$2,000.00

Free

Multiple Choice

Q 21Q 21

What is the market value of a zero coupon bond with a face value of $1,000 and 20 years to maturity, assuming an annual discount rate of 7%?
A)$100.00
B)$258.42
C)$502.57
D)$1,000.00
E)None of the above

Free

Multiple Choice

Q 22Q 22

Duration:
A)is always greater than maturity.
B)rises as the coupon payment rises.
C)measures how bond prices change with changes in maturity.
D)is a measure of total return.
E)is a measure of how price sensitive a bond is to a change in interest rates.

Free

Multiple Choice

Q 23Q 23

The Macaulay's duration of a 10-year, 10% bond with a face value of $1,000 and a market rate of 8%, compounded annually is:
A)10 years
B)11 years
C)12 years
D)13 years
E)None of the above

Free

Multiple Choice

Q 24Q 24

What is the Macaulay's duration of a 10 year zero-coupon bond with a face value of $1,000 and a market rate of 8%, compounded annually is:
A)10 years
B)11 years
C)12 years
D)13 years
E)None of the above

Free

Multiple Choice

Q 25Q 25

A bond that has an annual coupon rate of 15% has two years to maturity.If the current discount rate is 8%, what is the bond's Macaulay's duration?
A)2.00 years
B)1.99 years
C)1.88 years
D)1.77 years
E)1.66 years

Free

Multiple Choice

Q 26Q 26

-A bond that has an annual coupon rate of 11% has three years to maturity.If the current discount rate is 16%, what is the bond's Macaulay's duration?
A)3.00 years
B)2.991.years
C)2.89 years
D)2.79 years
E)2.69 years

Free

Multiple Choice

Q 27Q 27

-A bond that with a 12% coupon rate (paid semi-annually) has two years to maturity.If the current discount rate is 10%, what is the bond's Macaulay's duration?
A)4.00 years
B)3.47 years
C)2.00 years
D)1.73 years
E)1.50 years

Free

Multiple Choice

Q 28Q 28

-Which of the following is false?
A)As interest rates rise, bond prices rise, everything else the same.
B)Given an absolute change in interest rates, the percentage increase in a bond's price will be greater than the percentage decrease, everything else the same.
C)Long-term bonds change proportionately more in price than short-term bonds for a given rate change, everything else the same.
D)A bond with a lower coupon will change more in price than a bond with a higher coupon, everything else the same.
E)A bond's duration is a measure of its price elasticity.

Free

Multiple Choice

Q 29Q 29

Everything else the same, if the yield to maturity decreased 1 percentage point, which of the following bonds would have the largest percentage increase in value?
A)A 25-year 11% coupon bond.
B)A 25-year 7.5% coupon bond.
C)A 25-year zero-coupon bond.
D)A 3-year zero coupon bond.
E)A 3-year bond with a 7.5% coupon.

Free

Multiple Choice

Q 30Q 30

A bond's Macaulay duration is 7.95 years.If the current annual interest rate is 7%, what is the modified duration of this bond?
A)7.00 years
B)7.88 years
C)7.43 years
D)7.95 years
E)8.51 years

Free

Multiple Choice

Q 31Q 31

A 90-day Treasury bill is quoted as having a price of $987.50.What is its bond equivalent yield?
A)5.00%
B)5.13%
C)5.23%
D)5.62%
E)5.79%

Free

Multiple Choice

Q 32Q 32

A 90-day Treasury bill is quoted as having a 6% bond equivalent yield.What is the effective annual yield?
A)6.00%
B)6.14%
C)6.23%
D)6.62%
E)6.79%

Free

Multiple Choice

Q 33Q 33

A stripped security:
A)pays no interest.
B)has no par value.
C)is easier to value than a traditional bond.
D)should sell as a package of zero coupon bonds.
E)None of the above

Free

Multiple Choice

Q 34Q 34

A bank buys a $10,000 Treasury bill with a maturity of 1 year.Current market rates are 8%.If interest rates rise to 8.25%, what is the approximate change in the price of the T-bill?
A)-0.02%
B)-0.23%
C)-2.31%
D)-23.15%
E)-231.15%

Free

Multiple Choice

Q 35Q 35

Which of the following are sources of a bond's total return?
A)Coupon interest
B)Reinvestment income
C)Capital gains or losses realize at maturity
D)All of the above are sources of a bond's total return
E)a.and c.only

Free

Multiple Choice

Free

True False

Q 37Q 37

All other things the same, low coupon bonds have greater relative price volatility than high coupon bonds.

Free

True False

Q 38Q 38

For a given absolute change in interest rates, the percentage increase in an option free bond's price will be less than the percentage decrease.

Free

True False

Q 39Q 39

All other things the same, longer maturity bonds have greater relative price volatility than shorter maturity bonds.

Free

True False

Free

True False

Q 41Q 41

The greater the compounding frequency, the higher the future value, everything else the same.

Free

True False

Q 42Q 42

The greater the compounding frequency, the higher the present value, everything else the same.

Free

True False

Q 43Q 43

The duration of any security with interim cash flows will be less than the security's maturity.

Free

True False

Free

True False

Free

True False

Free

Not Answered

There is no answer for this question

Free

Not Answered

There is no answer for this question

Free

Not Answered

There is no answer for this question

Free

Not Answered

There is no answer for this question

Q 50Q 50

Assuming all other factors are held constant, discuss how changes in each of the following impact a bond's duration.
-Maturity
-Coupon Rate
-Market Rate

Free

Not Answered

There is no answer for this question