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March%204%20Town%20Meeting

# March%204%20Town%20Meeting - Chapter 7 Bonds Their...

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Chapter 7 Bonds & Their Valuation

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Announcements Bond Price Relationships Bond Risk Bond Quotes Other Bond Provisions
Chapter 7 Compass Post-quiz due by 8 PM Friday, Mar. 5. Chapter 8 Compass Pre-Flight due by 8PM Monday, Mar. 9. Bond/CAPM Project (project #2) is available in Group Projects folder and is due by 10 PM, Sunday, Mar. 15.

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Students should understand and be able to do the following from Chapter 7. Understand the vocabulary that describes bonds and the markets in which they trade. Annual and semi-annual bond valuation. Interpret the relationship between bond prices and interest rates. Calculate yield to maturity and yield to call. Understand what factors cause bond prices to change. Understand how call provisions, sinking fund provisions, interest rate risk and default risk affect bond returns and prices.
If a bond’s YTM (required return) rises, what will happen to its price? A. It will fall only if the bond sells at a premium. B. It will fall only if the bond sells at a discount. C. It will rise. D. It will fall.

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Which of the following is true for a bond whose YTM is less than its coupon rate? A. The bond sells for its par value B. The bond sells at a premium to par. C. The bond sells at a discount to par. D. The bond pays coupon payments in counterfeit money.
The following two \$1000 par value bonds both have a 7% YTM, make annual coupon payments and

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• Spring '08
• dyer

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