Question

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 when the bond is priced at par.

· greater than both the current yield and coupon rate when the bond is priced at a premium to par.

Question **2** of **71**

A bond priced at discount to par will have a current yield that …

· is greater than the YTM but less than the coupon rate.

· is greater than both the YTM and coupon rate.

· is less than the YTM but greater than the coupon rate.

· Is equal to the coupon rate.

· is less than both the YTM and coupon rate.

Question **3** of **71**

The bonds issued by The South Foot bear a coupon rate of 7.5 percent, payable semiannually. The bonds mature in 6.5 years, sell at par, and have a $1,000 face value. What is the yield to maturity?

· 7.59%

· 7.86%

· 7.50%

· 7.42%

· 15.00%

Question **4** of **71**

What is the yield to maturity of a 5-year, 6% annual coupon bond priced at 98?

6.00%

5.522%

6.481%

6.475%

6.122%

Question **5** of **71**

Which of the following investments have the highest yield to maturity (YTM)?

· $1,000 face value 5-year, 5% annual coupon bond priced at 94

· A 5-year annuity paying $240 annually (at year end)

· $1,000 face value 9-year, 7% annual coupon bond priced at 104

· $1,000 face value 9-year 7% annual coupon bond with a current yield of 6.667%

· $1,000 face value 5-year 0-coupon bond (compounded annually) priced at 73

Question **6** of **71**

I am considering investing in a 3-year 6% annual coupon bond. What price will provide me with a 10% YTM?

· 87.57

· 90.00

· 90.05

· 90.91

· 93.06

Question **7** of **71**

A large industrial business is considering issuing a $10m face value, 4-year 6% annual coupon bond with a 10% YTM. There is a 1% underwriting fee, calculated on the total face value of the bond, along with $50,000 in various legal, advisory and accounting fees. What is the company’s % all-in-cost (AIC)?

· 11.50%

· 10.52%

· 10.48%

· 10.32%

· 10.15%

Question **8** of **71**

A bond has a 6% YTM. If market rates began to decline, what would you expect to happen to the bond price?

· It would drop in price.

· It would go up in price.

· It would go up as long as the bond is trading at a discount.

· It would go down as long as the bond is trading at a discount.

· There will not be a change in price.

Question **9** of **71**

You own a fixed-rate bond that has a coupon rate of 4.5% and matures in 10 years. You purchased this bond at par value at time of issuance. If the current market rate for this type and quality of bond is 5.0%, then you would expect …

· to realize a capital loss if you sold the bond at the market price today.

· the yield to maturity to remain constant throughout the term of the bond.

· the current yield today to be less than 4.5%.

· today's market price to be higher than the face value of the bond.

· to realize a capital gain if you sold the bond at the market price today.

Question **10** of **71**

Apple 3% 10/12/2042 Notes |

Price: 95.054 / 95.453 |

In the bond quote above, what is the bid price?

95.054

95.253

95.453

95.300

It is impossible to tell from the information provided.

Answer #1

Problem 1:

A: No; YTM can be less than, greater than or equal to coupon rate

B: No; because discounting happened at YTM

C: Yes; If you invest all coupons at YTM till maturity and compute holding period return between PV and FV including face value and future value of invested coupon; The return is same as YTM.

The yield to maturity on a coupon bond is 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.

D: No; When priced at par, YTM = IRR = Coupon rate

E: No; when bond is trading at premium (PV > FV), Coupon rate > YTM

1.A 12-year bond has a 9 percent annual coupon, a yield to
maturity of
11.4 percent, and a face value of $1,000. What is the price of the
bond?
2.You just purchased a $1,000 par value, 9-year, 7 percent
annual coupon bond that pays interest on a semiannual basis. The
bond sells for $920. What is the bond’s nominal yield to
maturity?
a. 7.28%
b. 8.28%
c. 9.60%
d. 8.67%
e. 4.13%
f. None of
the above
3.A bond with...

1. A 9-year zero coupon bond has a yield to maturity of
11.8 percent, and a par value of $1,000. What is the
price of the bond?
2. A 7-year bond has a 8 percent coupon rate with the interest
paid in semi annual payments. The yield to maturity of
the bond is 2.3 percent, and a face value of
$1,000. What is the price of the bond?
3. A 12-year bond has a 9 percent annual coupon, a yield to
maturity of...

1. Omega Enterprises has an 8% coupon bond with exactly 16 years
to maturity. Interest is paid semi-annually. The bond is priced at
$1,125 per $1,000 of face value. a.) What is the yield to maturity
on this bond? b.)An investor purchased the bond at $1,125 and sold
it 5 years later at a price of $1,023. What was the investor’s
return. (Hint: calculate the YTM as in a) above but use the sale
price as the future value.
2....

What is the price of a 6% coupon bond if the bond is priced to
yield 5% YTM, and has 9 years to maturity? Assume $1000 par value
and semiannual coupon payments.
What will be the rate of return on the bond if the yield to
maturity at the end of the year is (a) 3%? (b) 5%? (c) 7%?

Gugenheim, Inc. offers a 7 percent coupon bond with annual
payments. The yield to maturity is 8.3 percent and the maturity
date is 7 years. What is the market price of a $1,000 face value
bond?
A $1000 face value bond has two years left to maturity, 5.6%
coupon rate with annual coupons, and is currently trading at $915.
What is the YTM on this bond?

1. The price of a 20-year coupon bond, coupon rate 7% p.a.,
yield to maturity 6% p.a., face value of $100 is closest to
(assuming semi-annual compounding)
Questions 2, 3, 4, 5 and 6
refer to the following information.
A one- year bond with a 5% annual coupon rate has a current
market price of $101. A two year bond with 7% annual coupons has a
market price of $98. A three-year bond with 9% annual coupons has a
market...

A 6% coupon, 24-year annual bond has a yield to maturity of
4.4%. Assuming the par value is $1,000 and the YTM does not change
over the next year, what will the price of the bond be today? What
will the bond price be in one year? What is the capital gains yield
for this bond?

The yield-to-maturity (YTM) on one-year bond with zero coupon
and face value $ 1000 is 5 %. The YTM on two-year bond with 5 %
coupon paid annually and face value $ 1000 is 6 %. (i) What are the
current prices of these bonds? (ii) Find Macaulay durations of
these bonds. Consider a third bond which is a zero coupon two-year
bond with face value $ 1000. (iii) What must be the price of the
third bond so that...

1. A 3-year annual coupon bond has a yield to maturity of 8%,
coupon rate of 5%. The face value of the bond is $1,000.
a. What is the price of the bond? Is it premium bond or discount
bond?
b. Suppose one year later immediately after you receive the
first coupon payment, the yield to maturity drops to 7%. What would
be your holding period return if you decide to sell the bond at the
market price then?
c....

3) A bond currently sells for $850. It has an
eight-year maturity, an annual coupon of $80 but paid
semi-annually, and a par value of $1,000. This bond has a
callable feature. If this bond can be called after 5 years, for
$1,025.
(1) What is its annual yield to maturity?
(2) What is its current yield?
(3) What is the bond’s nominal yield to call (YTC)?
(4) If you bought this bond, would you be more
likely to earn the YTM...

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