Chapter 07 Quiz A
Student Name _________________________
Student ID ____________
________
1.
A semiannual corporate bond has a face value of $1,000, a yield to maturity of 7.2 percent, and a coupon
rate of 7.5 percent. The bond matures 10 years from today. This bond:
a. pays interest payments of $75.00 every six months.
b. sells at par value.
c. is currently quoted at a price of 101.02.
d. has a current yield of 7.34 percent.
________ 2.
The price you pay to purchase a Treasury bond is the _____ price.
a. asked
b. yield
c. call
d. bid
________ 3.
When computing the present value of an annuity stream of payments you should discount:
a. the nominal cash flows using the real discount rate.
b.each increasing nominal payment by using the annuity growth formula.
c. each increasing nominal payment using the real discount rate for each period.
d. the real cash flows using the real discount rate.
________ 4.
An investor is considering two bonds, a 5.5 percent municipal bond versus a 7.5 percent taxable bond. If the
investor is in the 30 percent tax bracket, which bond should she chose? Why? Ignore state and local taxes.
a. the taxable bond; it has a higher aftertax yield
b. the taxable bond, it has a lower aftertax yield
c. the municipal bond; it is exempt from all taxes
d. the municipal bond, it has a higher aftertax yield
________ 5.
Teri earned 7.7 percent on her investments last year. If her real rate of return was 5.4 percent, what was the
inflation rate for the year?
a. .70 percent
b. 1.87 percent
c. 2.18 percent
d. 2.30 percent
________ 6.
TES, Inc. offers an 8.5 percent bond with a yield to maturity of 7.65 percent. The bond pays interest annually
and matures in 22 years. What is the market price of one of these bonds if the face value is $1,000?
a. $916.02
b. $916.62
c. $1,089.16
d. $1,089.81
________ 7.
Signature Sweets, Inc. has 8 percent semiannual bonds outstanding with 15 years to maturity. The latest
quote on these bonds is 109.16. What is the yield to maturity?
a. 7.00 percent
b. 7.67 percent
c. 13.99 percent
d. 14.49 percent
________ 8.
A zero coupon bond has a yield to maturity of 6.33 percent and 12 years until it fully matures. What is
the current price of this bond if the face value is $1,000?
a. $473.39
b. $478.77
c. $688.04
d. $692.51
________ 9.
An annual, tenyear bond is currently selling for $1,037.86 and has a yield to maturity of 6.23 percent.
What is the coupon rate of this bond if the face value is $1,000?
a. 3.25 percent
b. 4.50 percent
c. 5.00 percent
d. 6.75 percent
________ 10. The bonds of XYZ, Inc. are currently quoted at 97.65 and mature in 13 years. The bonds
pay a $45 semiannual coupon. What is the current yield on these bonds?
a. 4.32 percent
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 Spring '10
 Mohdhassan
 Finance, Interest, Interest Rate, Valuation

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