Quiz_6_Spring_2010

Quiz_6_Spring_2010 - G roup 1 1. A. B. C. D. E. Which type...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Group 1 1. Which type of bond has a coupon rate that is equal to the market yield? A. Zero coupon bond B. Fixed-rate discount bond C. Fixed-rate premium bond D. Par bond E. All bonds. Answer: D 2. A bond that is selling at a discount requires which of the following to be TRUE: A. The yield must be less than the discount rate. B. The yield must be greater than the coupon rate. C. The yield must be equal to the coupon rate. D. The yield must be less than the coupon rate. E. The yield must be zero. Answer: B 3. Which of the following bond has a coupon rate that is greater than the market yield? A. Par bond B. discount bond
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
C. premium bond D. Zero coupon bond E. All bonds. Answer: C Group 2 4. For which type of bond, does the bond issuer retain the interest rate risk? A. Fixed-rate discount bonds B. Fixed-rate premium bonds C. Zero Coupon bonds D. Floating-rate bonds E. All bonds. Answer: D 5. Which of the following bonds does not have reinvestment risk? A. Fixed-rate par bond B. Fixed-rate discount bond C. Fixed-rate premium bond D. Zero coupon bond E. Fixed-rate bond with call option
Background image of page 2
Answer: D 6. Which of the following is not a type of risk associated with investing in fixed-income securities? A. Interest rate risk B. Default risk C. Reinvestment risk D. Collateral risk E. Prepayment risk Answer: D Group 3 7. The risk that the issuer of a bond will not be able to repay its creditors is: A. Market risk B. Prepayment risk C. Reinvestment risk D. Default risk E. Interest rate risk Answer: D
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8. The risk that the issuer of a bond will call a bond prior to maturity is: A. Market risk B. Reinvestment risk C. Prepayment risk D. Default risk E. Interest rate risk Answer: C Group 4 9. Calculate the value of a non-callable 30-year bond with a coupon rate of 7% if you expect 9% yield on the bond. A. $793.62 B. $392.36 C. $779.04 D. $794.53 E. $783.42 Answer: A Group 5
Background image of page 4
10. Calculate the spread to treasuries on a 30 year corporate bond with a coupon rate of 8% using the following yields: 2 year treasury: 3.5% 10 year treasury: 4.5% 10 year municipal: 4% 30 year treasury: 6% Federal funds rate: 4.75% A. 4.5% B. 4% C. 3.5% D. 3.25% E. 2% Answer: E 11. Calculate the spread to treasuries on a 10 year corporate bond with a coupon rate of 9% using the following yields: 2 year treasury: 3.5% 10 year treasury: 4.5% 10 year municipal: 4%
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Federal funds rate: 4.75% A. 4.5% B. 4% C. 3.5% D. 3.25% E. 2% Answer: A Group 6 12. Which of the following is true concerning the interest rate risk of bonds? A. The longer the maturity of a bond, the higher the interest rate risk of that bond B. The higher the coupon of a bond, the higher the interest rate risk of that bond C. The shorter the maturity of a bond, the higher the interest rate risk of that bond D. The length of maturity of a bond does not affect interest rate risk E. The coupon of a bond has no effect on the interest rate risk of a bond Answer: A 13. Which of the following is true concerning the interest rate risk of bonds? A.
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/01/2010 for the course BA 301 taught by Professor Woodridgeandgray during the Spring '10 term at Penn State.

Page1 / 23

Quiz_6_Spring_2010 - G roup 1 1. A. B. C. D. E. Which type...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online