CHAPTER TWELVE
Multiple Choice Questions
121.
If the yieldtomaturity of a bond is less than the coupon rate,
the bond will sell
at:
a.
a discount
b.
a premium
c.
par value
d.
market value
122.
If
the yieldtomaturity of a bond is more than the coupon rate,
the bond will sell
at:
a.
a discount
b.
a premium
c.
par value
d.
market value
123.
A bond is selling for 95% of par and has an annual coupon rate of 6% and will
mature in five years.
There are semiannual coupon payments.
Calculate the
yieldtomaturity on an annualized basis (APR).
a.
10%
b.
8.21%
c.
7.21%
d.
3.60%
124.
Calculate the price of a sixyear $1000 facevalue bond with a 7% annual coupon
rate and a yieldtomaturity of 6% with semiannual coupon payments.
a.
$1050
b.
$1020
c.
$
980
d.
$ 950
125.
The discounted cash flow model for bonds:
a.
uses the coupon interest rate to discount bonds
b.
provides the future value of all cash flows
c.
uses the required rate of return to discount all cash flows
d.
is the present value of all coupon dividends
142
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View Full Document126.
The discounted cash flow model for bonds is best described as:
a.
V
B
= INT x 1  1/(1+k
d
)
n
+ M/(1+k
d
)
n
k
d
b. V
B
= INT x 1 + 1/(1+k
d
)
n
+ M/(1+k
d
)
n
k
d
c. V
B
= INT x 1  1/(1+k
d
)
n
 M/(1+k
d
)
n
k
d
d. V
B
= INT + 1  1/(1+k
d
)
n
+ M/(1+k
d
)
n
k
d
127.
A bond sold at par with a coupon rate of 7% will have a YTM:
a.
greater than 7%
b.
less than 7%
c.
equal to 7%
d.
different from the market rate
128
A bond with a fixed coupon has the following relationship with the market
required return other things being equal:
a.
constant
b.
negative
c.
positive
d.
logarithmic
129.
A zerocoupon bond will have a price:
a.
equal to par
b.
less than par
c.
greater than par
d.
equal to the market rate
1210. A bond is selling for 105% of par, has a coupon rate of 7%, and will mature in
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 Spring '10
 Mr.Cula
 Accounting, Time Value Of Money

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