Quiz Chapter 7

Quiz Chapter 7 - CHAPTER 7. BONDS AND THEIR VALUATION Bond...

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Chapter 7: Bonds and Their Valuation Page 1 Bond valuation 1. The Carter Company's bonds mature in 10 years have a par value of $1,000 and an annual coupon payment of $80. The market interest rate for the bonds is 9%. What is the price of these bonds? a. $935.82 b. $941.51 c. $958.15 d. $964.41 Callable bond 2. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? a. Market interest rates decline sharply. b. The company’s bonds are downgraded. c. Market interest rates rise sharply. d. Inflation increases significantly. Bond concepts 3. Which of the following statements is NOT CORRECT? a. If a bond is selling at its par value, its current yield equals its yield to maturity. b. If a bond is selling at a discount to par, its current yield will be less than its yield to maturity. c. All else equal, bonds with longer maturities have more interest rate (price) risk than do bonds with shorter maturities. d. All else equal, bonds with larger coupons have greater interest rate (price) risk than do bonds with smaller coupons. Types of debt
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This note was uploaded on 12/16/2009 for the course FIN 300 taught by Professor Olander during the Spring '08 term at ASU.

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Quiz Chapter 7 - CHAPTER 7. BONDS AND THEIR VALUATION Bond...

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