03%20bonds%20test%20bank%20problems

03%20bonds%20test%20bank%20problems - FNAN 301 Test bank...

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FNAN 301 Test bank problems – bonds 1. On Monday, 20,000 bonds issued by Brooks Books were bought by a variety of investors for $1,000 per bond. Brooks Books received $20 million from the sale of these bonds. Were the 20,000 bonds more likely sold on the primary market or the secondary market? 2. On Monday, 20,000 bonds issued by Brooks Books were bought by a variety of investors for $1,000 per bond. Brooks Books received nothing from the sale of these bonds. Were the 20,000 bonds more likely sold on the primary market or the secondary market? 3. Which of the following entities issue bonds? You may choose more than one. A. Corporations B. The U.S. government C. States D. Counties E. Cities F. Bodies and agencies created by political subdivisions G. Foreign countries 4. Indicate whether the following assertion is generally true or false: If a company performs very well, bond investors can receive higher cash flows than indicated by the coupon rate and face value. 5. Indicate whether the following assertion is generally true or false: If a company performs very poorly, bond investors can receive lower cash flows than indicated by the coupon rate and face value. 6. Indicate whether the following assertion is true or false: If Donatello Company is performing very poorly, the firm must still make promised coupon payments to bondholders or else the bondholders could take legal recourse against the firm. 7. Quagmire Airlines has a bond outstanding that pays a semi-annual coupon of $65. The bond is priced at $975 and has a par value of $1,000. a. What is the coupon rate of the bond? b. What is the current yield of the bond? 8. A bond has a current yield of 9.2 percent, a price of $1,200, and a par value of $1,000. a. What is the coupon rate of the bond? b. If the bond pays semi-annual coupons, how much is paid in one coupon payment? c. If the bond pays semi-annual coupons, what is the coupon rate? 9. A bond has a coupon rate of 12.8%, par value of $1000, 7 years until maturity, YTM of 11.7%, and annual coupons with the next one due in 12 months. a. What is the price of the bond? b. What is the current yield of the bond? 10. A bond has a coupon rate of 9.6%, par value of $1000, 6 years until maturity, YTM of 7.8%, and semi-annual coupons with the next one due in 6 months. a. What is the price of the bond? b. What is the current yield of the bond? 11. A bond has a coupon rate of 8.8%, par value of $1000, 14 years until maturity, YTM of 9.4%, and semi-annual coupons with the next one due in 6 months. What is the current yield of the bond? (Summer C 2010, quiz 2, question 7) 1
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FNAN 301 Test bank problems – bonds 12. What is the price of a bond with a coupon rate of 8.2%, par value of $1000, 22 years until maturity, and a yield-to-maturity of 6.7% if coupons are paid semi-annually with the next one due in six months? (Fall 2009, quiz 2, question 10)
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This note was uploaded on 02/03/2011 for the course FINANCE 301 taught by Professor Murray during the Spring '09 term at George Mason.

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03%20bonds%20test%20bank%20problems - FNAN 301 Test bank...

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