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Exam 6: Bonds

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Question 31

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Which of the following is true about the face value of a bond?

A) It is the notional amount we use to compute coupon payments.
B) It is the amount that is repaid at maturity.
C) It is usually denominated in standard increments,such as $1,000.
D) All of the above are true.

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Question 32

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How are investors in zero-coupon bonds compensated for making such an investment?

A) Such bonds are purchased at their face value and sold at a premium at a later date.
B) The bond makes regular interest payments.
C) Such bonds are purchased at a discount to their face value.
D) The face value of these bonds is less than the value of the bond when the bond matures.

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Question 33

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Which of the following statements is FALSE?

Which of the following best illustrates why a bond is a type of loan?

A corporate bond which receives a BBB rating from Standard and Poor's is considered

How are the cash flows of a coupon bond different from an amortizing loan?

A company releases a five-year bond with a face value of $1000 and coupons paid semiannually.If market interest rates imply a YTM of 6%,what should be the coupon rate offered if the bond is to trade at par?

A corporate bond makes payments of $9.67 every month for ten years with a final payment of $2009.67.Which of the following best describes this bond?

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 AAA rating is closest to:

A company issues a ten-year bond at par with a coupon rate of 6% paid semi-annually.The YTM at the beginning of the third year of the bond (8 years left to maturity) is 7.8%.What is the new price of the bond?

Assuming the appropriate YTM on the Sisyphean bond is 9%,then this bond will trade at

Use the table for the question(s) below. Consider the following yields to maturity on various one-year zero-coupon securities: -The credit spread of the B corporate bond is closest to:

What care,if any,should be taken regarding the timing of the cash flows while drawing the timeline and associated cash flows of a coupon bond?

Which of the following bonds will be least sensitive to a change in interest rates?

Assuming that this bond trades for $1035.44,then the YTM for this bond is equal to:

Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments) .The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Assuming that Luther's bonds receive a AA rating,the price of the bonds will be closest to:

A five-year bond with a $1000 face value has a yield to maturity is 5.5% and its coupon rate is 6.0% paid annually.The dirty price of this bond exactly 6 months after its second coupon payment is closest to:

Use the information for the question(s) below. Luther Industries needs to raise $25 million to fund a new office complex.The company plans on issuing ten-year bonds with a face value of $1000 and a coupon rate of 7.0% (annual payments) .The following table summarizes the YTM for similar ten-year corporate bonds of various credit ratings: -Assuming that Luther's bonds receive a AAA rating,the price of the bonds will be closest to:

What is the dirty price of a bond?

The credit spread of a bond shrinks if it is perceived that the probability of the issuer defaulting increases.