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Sample_Questions-chapter8-9

# Sample_Questions-chapter8-9 - Sample Questions Chapter 8...

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Sample Questions – Chapter 8 and chapter 9 1. A bond that makes no coupon payments and is initially priced at a deep discount is called a _____ bond. e a. Treasury b. municipal c. floating-rate d. junk e. zero coupon 2. An asset characterized by cash flows that increase at a constant rate forever is called a: a 3. A bond with a 7% coupon that pays interest semi-annually and is priced at par will have a market price of _____ and interest payments in the amount of _____ each. d 4. All else constant, a bond will sell at _____ when the yield to maturity is _____ the coupon rate. e 5. American Fortunes is preparing a bond offering with an 8% coupon rate. The bonds will be repaid in 10 years. The company plans to issue the bonds at par value and pay interest semiannually. Given this, which of the following statements are correct? e I. The initial selling price of each bond will be \$1,000. II. After the bonds have been outstanding for 1 year, you should use 9 as the number of compounding periods when calculating the market value of the bond. III. Each interest payment per bond will be \$40. IV. The yield to maturity when the bonds are first issued is 8%. a. I and II only b. II and III only c. II, III, and IV only d. I, II, and III only e. I, III, and IV only 6. The yield to maturity is: e 1

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Sample_Questions-chapter8-9 - Sample Questions Chapter 8...

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