Question

Question 1

The price of an outstanding bond will decline when

Select one:

a. the current level of interest rate increases.

b. there is an increase in the demand for the bond.

c. the current level of interest rate declines.

d. the yield is equal to the coupon rate.

Question 2

When a bond sells below its par value, it is called

Select one:

a. par value bond.

b. discount from par.

c. market value bond.

d. premium above par.

Question 3

The price of the bond will decline when

Select one:

a. risk premium decline.

b. interest rates decline.

c. interest rates increase.

d. the money supply decline.

Question 4

The time value of money

Select one:

a. is more important to the lender than the borrower.

b. is not important in determining value of securities.

c. represents the value of property as time passes by due to depreciation and depletion.

d. represents a trade off between purchasing power today for purchasing power in the future.

Question 5

The price of the bond is the present of future payments, including the ____ and ____.

Select one:

a. yield, face value on maturity

b. coupon payments, face value on maturity

c. coupon payments, current price

d. yield, current price

Answer #1

**1. Option (a) is correct**

The price of an outstanding bond will decline when the current level of interest rate increases. There is an inverse relationship between bond price and interest rates.

**2. Option (b) is correct**

When a bond sells below its par value, it is called discount from par.

**3. Option (c) is correct**

The price of the bond will decline when interest rate increases. There is an inverse relationship between bond price and interest rates.

**4. Option (d) is correct**

The time value of money represents a trade off between purchasing power today for purchasing power in the future.

**5. Option (b) is correct**

The price of the bond is the present value of future payments including the coupon payments and face value on maturity.

1. In the context of bond valuation, what does a
built-in put option do?
Select one:
a. It gives the bond issuer the right buy the bond back from the
bond holder prior to maturity.
b. It gives the bond holder the right to sell the bond back to
the bond issuer prior to maturity.
c. Both of the above.
d. None of the above.
2. Which of the following is mostly likely to lead to an
increase in the...

Question 1
In terms of bonds, what is “reinvestment risk”?
a) Change in price due to changes in interest rates.
b) Risk of investing funds in debt of questionable credit
quality.
c) Uncertainty concerning rates at which cash flows can be
reinvested.
d) None of the above.
Question 2
If yield-to-maturity (YTM) is greater than the coupon rate (CPN)
of a bond, then the bond price will be:
a) Greater than par or face value.
b) Less than par or...

Which one of the following statements is true? Question 13
options: 1) A premium bond has a yield to maturity that is less
than the bond's coupon rate. 2) A discount bond has a coupon rate
that is higher than the bond's yield to maturity. 3) The yield to
maturity on a premium bond exceeds the bond's coupon rate. 4) The
current yield on a par value bond will exceed the bond's yield to
maturity. 5) The current yield on...

You are purchasing a 20-year, semi-annual bond with a current
market price of $973.64. If the yield to maturity is 8.68 percent
and the face value is $1,000, what must the coupon payment be on
the bond?
2.Collingwood Homes has a bond issue outstanding that pays an
8.5 percent coupon and has a yield to maturity of 9.16%. The bonds
have a par value of $1,000 and a market price of $944.30. Interest
is paid semiannually. How many years until...

Question 1 of 71
The yield to maturity on a coupon bond is …
· always greater than the
coupon rate.
· the rate an investor
earns if she holds the bond to the maturity date, assuming she can
reinvest all coupons at the current yield.
· the rate an investor earns
if she holds the bond to the maturity date, assuming she can
reinvest all coupons at the yield to maturity.
· only equal to the internal
rate of return of a bond...

1. A bond issued by ABC Corp. has a face value of
$1,000, coupon rate of 6%, price of $1,029.13 and time to maturity
of one year. (PLEASE SHOW ALL WORK)
a. What is its current yield?
b. What is its yield to maturity?
c. Is this a discount, premium or par bond?
Why?
d. Now suppose instead of having one year to maturity,
it has two year to maturity and is priced $1,057.40. What is the
current yield and...

A bond with an annual coupon of $100 originally sold at par for
$1,000. The current yield to maturity on this
bond is 9%. This bond would sell at
A. A discount to par.
B. At par.
C. At a premium to par.
D. Face value.
E. Not enough information.

A corporate bond with a 8 percent coupon was issued last year.
Which one of these would apply to this bond today if the yield to
maturity is 7 percent?
Select one:
a.
The current yield drops below the yield to maturity.
b.
The coupon rate has decreased to 7 percent.
c.
The bond is selling at par value.
d.
The bond is currently selling at a premium.
e.
The current yield exceeds the coupon rate.

A discount bond:
Select one:
a. Has a coupon rate which is greater than the yield to
maturity.
b. Has a par value which is less than the market value.
c. Has a coupon rate which is less than the market rate of
interest.
d. Is selling for more than face value.
e. Is the name given to a bond that has been called prior to
maturity.

What is the price of a $1000 face value zero-coupon bond with 4
years to maturity if the required return on these bonds is 3%?
Consider a bond with par value of $1000, 25 years left to
maturity, and a coupon rate of 6.4% paid annually. If the yield to
maturity on these bonds is 7.5%, what is the current bond
price?
One year ago, your firm issued 14-year bonds with a coupon rate
of 6.9%. The bonds make semiannual...

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