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Chapter 12 MC

# Chapter 12 MC - CHAPTER TWELVE Multiple Choice Questions...

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CHAPTER TWELVE Multiple Choice Questions 12-1. If the yield-to-maturity 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 12-2. If the yield-to-maturity 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 12-3. A bond is selling for 95% of par and has an annual coupon rate of 6% and will mature in five years. There are semi-annual coupon payments. Calculate the yield-to-maturity on an annualized basis (APR). a. 10% b. 8.21% c. 7.21% d. 3.60% 12-4. Calculate the price of a six-year \$1000 face-value bond with a 7% annual coupon rate and a yield-to-maturity of 6% with semi-annual coupon payments. a. \$1050 b. \$1020 c. \$ 980 d. \$ 950 12-5. 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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12-6. 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 12-7. 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 12-8 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 12-9. A zero-coupon bond will have a price: a. equal to par b. less than par c. greater than par d. equal to the market rate 12-10. A bond is selling for 105% of par, has a coupon rate of 7%, and will mature in
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Chapter 12 MC - CHAPTER TWELVE Multiple Choice Questions...

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