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Unformatted text preview: 423. Summer 2009
en l teller
nework Quiz. #5 J I. i" raj . r ’“ l‘itﬁl 1" is u” 9‘3» Pro to abide by tl
y other notes or materials. . t ,
Name_ A ﬁﬁ' it in
uiz. l will only use the homework thatl ‘ ' ' 0 his
above, 1 agree to honor code du tint, t q By signing my name and PlD
and will not use an have completed on my own,
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the ques 1 '1 '1) When inflation rose in the late 19705. I y I a )
arkets by ottering higher deposit rates. olidified their advantage over money m
houses introduced highly popula r money
money out of bank deposits. y out of money market mutua A) banks 5
signiﬁcant amounts of market mutual funds, which drew C) consumers moved mon e l funds because their returns did not keep pace with inflation,
D) consumers were unable to take advantage
rnent of large transaction sizes. of higher rates in money markets because of the require.
F.) Both (c) and (d) are true. 2) To sell an old bond when interest rates have _ _ J the holder will have to _____ the price 2} of the bond until the yield to the buyer is the same as theinarket rate.
A) fallen; lower B) risen; raise risen; lower D} risen; inflate
3} Call provisions will be exercised when interest rates _ and bond values ___. 3) ‘3
A) rise; tall B) rise; rise fall; rise D) tall; tall
4) The nearer a bond's price is to its par value and the longer the maturity of the bond the more. 4'} closely _ __ approximates ____
A) yield to maturity; coupon rate. B current yield; coupon rate.
C) yield to maturity; current yield. @licurrent yield; yield to maturity.
5) The current yield on a $6,000, l0 percent coupon bondﬁling for 55,000 is 5} ' _ , "
A) 5%. B) 'lS‘E-‘Ei. ijlel-‘o. D} 10s..
6) Preferred stockholders hold a claim on assets that has priority over the claims of (3] l‘ (_r
A) bondholders, but alter that of common stockholders.
B both common stockholders and bondholders.
Clicommon stockholders, but after that of bondholders.
1) neither common stockholders nor bondholders.
F) The riskiest capital market security is 7) air)
A corporate bonds. B) preferred stock.
@common stock. D) 'lreasury bonds.
a anges trade in the over—the—counter ma rket. In this exchange, 8) w 8) Securities not listed on one of the exch
dealers "make a market" by
A) selling stocks from inventory when investors want to buy. B buying stocks for inventory when investors want to sell.
C)idoing both or the above,
D) doing neither of the above. p 9) What is the annualized discount rate 92: on a Treasury bill that you purchase for $9,940 that will 9) E :
mature in 91 days for 510,000?
A} 4.05% B) 3.96% @219 D) 0.60% 0ﬁfe
I I” . : . - . n
3314/0 at? we“: new? 3nd“) ,.
““ swims WE'Vqu orig/‘5 10) The price of 182~day commercial paper is $7,840. If the annualized investment rate is 4.09 ‘Vo, what 10) will the paper pay at maturity (approximately)? .\
A} $4,150 B) $7,900 C)i$8,000 D) $8,600
1 1) How much would you pay for a Treasury bill that matures in 182 days and pays $1l'l,000 if 11) ,3! you require a 1.8% discount rate?
A) $10,180 B} $9,643 C) $9,323 (@9309 12) If the municipal bond rate. is 4.25% and the corporate bond rate is 6.25%, what is the marginal tax 12) f ra ssurning investors are indifferent between the two bonds?
(Ajay-z, B) 35wu C) 47% D) 68% 13) A $1,000 par bond with an annual coupon has only 1 year until maturity. Its current yield is 13) E :/
6.713% and its yield to maturity is 10%. What is the pri of the bond?
A) $909.09 B) $937.09 ($3968.17 D) $1,067.13 Textbook Problems. Write your answer in the space provided or on a separate sheet of paper. 14) (2 points} Is a Treasury bond issued 29 years ago with six months remaining before it matures a money market
instrument? W hy or why not? 15} (2 points) “That is a sinking fund? Do investors like bonds that contain this feature? Why or why not? Page 2 of 3 ...
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- Summer '08