exam 2 key 2

exam 2 key 2 - Exam 2 Key SECTION 1 3PM VERSION 1 SECTION 2...

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Exam 2 Key SECTION 1 3PM VERSION 1 SECTION 2 4:30PM VERSION 2 1. A premium bond has a: I. market price equal to the face value. II. market price that exceeds the face value. III. yield to maturity that exceeds the coupon rate. IV. yield to maturity that is less than the coupon rate. a. I only b. I and III only c. II and III only d. I and IV only E . II and IV only BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 006 #34 SECTION: 6.1 TOPIC: PREMIUM BOND TYPE: CONCEPTS
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2. An unexpected increase in market interest rates will cause: I. bond prices to increase. II. bond prices to decrease. III. yields to maturity to increase. IV. yields to maturity to decrease. a. I only b. I and III only c. I and IV only D . II and III only e. II and IV only BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 006 #41 SECTION: 6.1 TOPIC: INTEREST RATE CHANGES TYPE: CONCEPTS 3. The price at which an investor can purchase a bond from a dealer is called the _____ price. A . asked b. coupon c. call d. put e. bid BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #20 SECTION: 6.5 TOPIC: ASKED PRICE TYPE: DEFINITIONS 4. A sinking fund is an account managed by a bond trustee for the sole purpose of: a. paying interest payments on a semi-annual basis. B . redeeming bonds early. c. repaying the face value at maturity. d. paying the expenses required to reissue outstanding bonds. e. paying the "balloon payment" at maturity. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #12 SECTION: 6.2 TOPIC: SINKING FUND TYPE: DEFINITIONS
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5. A protective covenant: a. protects the borrower from unscrupulous practices by the lender. b. is designed to ensure a reasonable bid-ask spread for the bond dealer. c. prevents a bond from being called. D . limits the actions of the borrower. e. guarantees that bondholders will receive all the interest and principal payments that are due to them. BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #17 SECTION: 6.2 TOPIC: PROTECTIVE COVENANT TYPE: DEFINITIONS 6. A $1,000 face value bond is currently quoted at 93.7. The bond pays semiannual payments of $32.50 and matures in 8 years. What is the coupon rate? a. 3.25 percent b. 4.89 percent c. 5.00 percent D . 6.50 percent e. 7.56 percent Coupon rate = ($32.50 2) / $1,000 = .065 = 6.50 percent BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 1 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #77 SECTION: 6.1 TOPIC: COUPON RATE TYPE: PROBLEMS
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7. You own two bonds. Both bonds pay annual interest, have 8 percent coupons, $1,000 face values, and currently have 8 percent yields to maturity. Bond 1 has 9 years to maturity and Bond 2 has 6 years to maturity.
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This note was uploaded on 05/06/2008 for the course BCOR 2200 taught by Professor Tomnelson during the Spring '08 term at Colorado.

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exam 2 key 2 - Exam 2 Key SECTION 1 3PM VERSION 1 SECTION 2...

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