Question 1

A three-month treasury bill sold for a price of $99.311998 per $100 face value.The yield to maturity of this bond expressed as an EAR is closest to:

Accepted Answer

A)  2.5%.
B)  2.8%.
C)  3.2%.
D)  4.0%.

Question 2

Consider a zero-coupon bond with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:

Accepted Answer

A)  $118.
B)  -$53.
C)  $53.
D)  $673.

Question 3

Which of the following statements is FALSE?

Accepted Answer

A)  The bond's expected return,which is equal to the firm's debt cost of capital,is less than the yield to maturity if there is a risk of default.
B)  The two best-known bond-rating companies are Standard & Poor's and Dow Jones.
C)  Bonds in the bottom five categories are often called speculative bonds,junk bonds,or high-yield bonds.
D)  Bond ratings encourage widespread investor participation and relatively liquid markets.

Question 4

Which of the following statements is FALSE?

Accepted Answer

A)  Investors pay less for bonds with credit risk than they would for otherwise identical default-free bonds.
B)  Credit spreads fluctuate as perceptions regarding the probability of default change.
C)  Credit spreads are high for bonds with high ratings.
D)  We refer to the difference between the yields of the corporate bonds and the Treasury yields as the default spread or credit spread.

Question 5

Consider a zero-coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

Accepted Answer

A)  46%.
B)  17%.
C)  22%.
D)  38%.

Question 6

Use the table for the question(s) below.
Consider the following four bonds that pay annual coupons: 0) to 6% (Price1) is closest to: A) -4%. B) -6%. C) -1%. D) 4%." class="answers-bank-image d-inline" rel="preload" >
-The percentage change in the price of the bond "A" if its yield to maturity increases from 5% (Price0) to 6% (Price1) is closest to:

Accepted Answer

A)  -4%.
B)  -6%.
C)  -1%.
D)  4%.

Question 7

Which of the following statements is FALSE?

Accepted Answer

A)  Because the cash flows promised by the bond are the most that bondholders can hope to receive,the cash flows that a purchaser of a bond with credit risk expects to receive may be less than that amount.
B)  By consulting bond ratings,investors can assess the credit-worthiness of a particular bond issue.
C)  Because the yield to maturity for a bond is calculated using the promised cash flows,the yield of bonds with credit risk will be lower than that of otherwise identical default-free bonds.
D)  A higher yield to maturity does not necessarily imply that a bond's expected return is higher.

Question 8

Use the table for the question(s) below.
Consider the following zero-coupon yields on default-free securities: 
-The price today of a 3-year default-free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

Accepted Answer

A)  $1000.
B)  $1021.
C)  $1013.
D)  $1005.

Question 9

A 4-year default-free security with a face value of $1000 and an annual coupon rate of 5.25% will trade:

Accepted Answer

A)  at a premium.
B)  at par.
C)  at a discount.
D)  There is insufficient information provided to answer this question.

Question 10

If its YTM does not change,how does a bond's cash price change between coupon payments?

Accepted Answer

Two-part Answer:
1.The bond's cash price...

Question 11

Which of the following statements is FALSE?

Accepted Answer

A)  Given the spot interest rates,we can determine the price and yield of any other default-free bond.
B)  As the coupon increases,earlier cash flows become relatively less important than later cash flows in the calculation of the present value.
C)  When the yield curve is flat,all zero-coupon and coupon-paying bonds will have the same yield,independent of their maturities and coupon rates.
D)  When U.S.bond traders refer to "the yield curve," they are often referring to the coupon-paying Treasury yield curve.

Question 12

Use the table for the question(s) below.
Consider the following four bonds that pay annual coupons: 
-Which of the four bonds is the least sensitive to a one percent increase in the YTM?

Accepted Answer

A)  Bond A
B)  Bond B
C)  Bond C
D)  Bond D

Question 13

Use the following information to answer the question(s) below. 
-Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons,a coupon rate of 8%,and a face value of $1000.Wyatt Oil believes it can get a AAA rating from Standard and Poor's for this bond issue.If Wyatt Oil is successful in getting a AAA rating,then the issue price for these bonds would be closest to:

Accepted Answer

A)  $891.
B)  $901.
C)  $1000.
D)  $1107.

Question 14

Which of the following formulas is INCORRECT?

Accepted Answer

A)  Yield to maturity for an n-period zero-coupon bond = 
B)  Price of an n-period bond =  +  + ...+ 
C)  Price of an n-period bond = Coupon ×   + 
D)  Coupon =

Question 15

Use the table for the question(s) below.
Consider the following yields to maturity on various one-year zero-coupon securities: 
-The price (expressed as a percentage of the face value) of a one-year,zero-coupon corporate bond with a BBB rating is closest to:

Accepted Answer

A)  95.60.
B)  94.16.
C)  95.42.
D)  94.70.

Question 16

Which of the following statements is FALSE?

Accepted Answer

A)  If the bond trades at a discount,an investor who buys the bond will earn a return both from receiving the coupons and from receiving a face value that exceeds the price paid for the bond.
B)  Most coupon bond issuers choose a coupon rate so that the bonds will initially trade at,or very near to,par.
C)  Coupon bonds always trade for a discount.
D)  At any point in time,changes in market interest rates affect a bond's yield to maturity and its price.

Question 17

Use the table for the question(s)below.
The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): 
-Plot the zero-coupon yield curve (for the first five years).

Accepted Answer

The answer of Use the table for the question(s)below.
The following...

Question 18

Suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%.This bond's coupon rate is closest to:

Accepted Answer

A)  3.5%.
B)  6.0%.
C)  7.0%.
D)  8.0%.

Question 19

Use the following information to answer the question(s) below. 
-Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons,a coupon rate of 7%,and a face value of $1000.Wyatt Oil believes it can get a BBB rating from Standard and Poor's for this bond issue.If Wyatt Oil is successful in getting a BBB rating,then the issue price for these bonds would be closest to:

Accepted Answer

A)  $800.
B)  $891.
C)  $901.
D)  $1000.

Question 20

The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond is called:

Accepted Answer

A)  the current yield.
B)  the yield to maturity.
C)  the zero-coupon yield.
D)  the discount yield.

Exam 6: Valuing Bonds

A 4-year default-free security with a face value of $1000 and an annual coupon rate of 5.25% will trade:

Correct Answer
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Consider a zero-coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

Correct Answer
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The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond is called:

Correct Answer
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If its YTM does not change,how does a bond's cash price change between coupon payments?

Correct Answer
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Two-part Answer:
1.The bond's cash price...
View Answer

Which of the following statements is FALSE?

Correct Answer
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Correct Answer
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Use the table for the question(s) below. Consider the following yields to maturity on various one-year zero-coupon securities: -The price (expressed as a percentage of the face value) of a one-year,zero-coupon corporate bond with a BBB rating is closest to:

Correct Answer
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Which of the following statements is FALSE?

Correct Answer
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Use the table for the question(s) below. Consider the following zero-coupon yields on default-free securities: -The price today of a 3-year default-free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

Correct Answer
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Correct Answer
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Suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%.This bond's coupon rate is closest to:

Correct Answer
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Use the table for the question(s) below. Consider the following four bonds that pay annual coupons: -The percentage change in the price of the bond "A" if its yield to maturity increases from 5% (Price₀) to 6% (Price₁) is closest to:

Correct Answer
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Consider a zero-coupon bond with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:

Correct Answer
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Which of the following statements is FALSE?

Correct Answer
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Use the table for the question(s) below. Consider the following four bonds that pay annual coupons: -Which of the four bonds is the least sensitive to a one percent increase in the YTM?

Correct Answer
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Which of the following statements is FALSE?

Correct Answer
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Use the table for the question(s)below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): -Plot the zero-coupon yield curve (for the first five years).

Correct Answer
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Which of the following statements is FALSE?

Correct Answer
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A three-month treasury bill sold for a price of $99.311998 per $100 face value.The yield to maturity of this bond expressed as an EAR is closest to:

Correct Answer
verified

Which of the following formulas is INCORRECT?

Correct Answer
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Exam 6: Valuing Bonds

A 4-year default-free security with a face value of $1000 and an annual coupon rate of 5.25% will trade:

Correct AnswerverifiedShow Answer

Consider a zero-coupon bond with 20 years to maturity.The percentage change in the price of the bond if its yield to maturity decreases from 7% to 5% is closest to:

Correct AnswerverifiedShow Answer

The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond is called:

Correct AnswerverifiedShow Answer

If its YTM does not change,how does a bond's cash price change between coupon payments?

Correct AnswerverifiedTwo-part Answer:1.The bond's cash price...View AnswerShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the table for the question(s) below. Consider the following yields to maturity on various one-year zero-coupon securities: -The price (expressed as a percentage of the face value) of a one-year,zero-coupon corporate bond with a BBB rating is closest to:

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Use the table for the question(s) below. Consider the following zero-coupon yields on default-free securities: -The price today of a 3-year default-free security with a face value of $1000 and an annual coupon rate of 6% is closest to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a ten-year bond with semiannual coupons has a price of $1,071.06 and a yield to maturity of 7%.This bond's coupon rate is closest to:

Correct AnswerverifiedShow Answer

Use the table for the question(s) below. Consider the following four bonds that pay annual coupons: -The percentage change in the price of the bond "A" if its yield to maturity increases from 5% (Price0) to 6% (Price1) is closest to:

Correct AnswerverifiedShow Answer

Consider a zero-coupon bond with 20 years to maturity.The amount that the price of the bond will change if its yield to maturity decreases from 7% to 5% is closest to:

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Use the table for the question(s) below. Consider the following four bonds that pay annual coupons: -Which of the four bonds is the least sensitive to a one percent increase in the YTM?

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Use the table for the question(s)below. The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value): -Plot the zero-coupon yield curve (for the first five years).

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

A three-month treasury bill sold for a price of $99.311998 per $100 face value.The yield to maturity of this bond expressed as an EAR is closest to:

Correct AnswerverifiedShow Answer

Which of the following formulas is INCORRECT?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Two-part Answer:
1.The bond's cash price...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Use the table for the question(s) below. Consider the following four bonds that pay annual coupons: -The percentage change in the price of the bond "A" if its yield to maturity increases from 5% (Price₀) to 6% (Price₁) is closest to:

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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