Chapter 07 Practice Quiz

Chapter 07 Practice Quiz - Chapter 07 Practice Quiz _ 1....

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Chapter 07 Practice Quiz Student Name _________________________ ________ 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
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Chapter 07 Practice Quiz - Chapter 07 Practice Quiz _ 1....

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