Test 2 Sample Solution - Student Name: Test 2 (50 Minutes,...

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Student Name: Test 2 (50 Minutes, 40 Points) Multiple Choice Questions (10 points or about 12.5 minutes) One point for each correct answer for a total of 10 points. No documentation necessary. 1. The coupon of a bond is the: a. amount of discount received when a bond is purchased. b. amount paid to a bond dealer when a bond is purchased. c. difference between the bid and ask price. d. annual interest divided by the current bond price. e. stated interest payment on a bond. 2. The annual interest on a bond divided by the bond's market price is called the: a. yield to maturity. b. yield to call. c. total yield. d. current yield. e. required yield. 3. A bond that pays no interest payments and sells at a deep discount is called a(n) _____ bond. a. callable b. income c. zero coupon d. convertible e. tax-free 4. A premium bond has a: I. market price equal to the face value. II. market price that exceeds the face value. III. yield to maturity that exceeds the coupon rate. IV. yield to maturity that is less than the coupon rate. a. I only b. I and III only c. II and III only d. I and IV only e. II and IV only
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Student Name: 5. Which one of the following bonds is the most sensitive to interest rate movements? a. zero-coupon, 5 year b. 7 percent annual coupon, 5 year c. zero-coupon, 10 year d. 5 percent semi-annual coupon, 10 year e. 5 percent annual coupon, 10 year 6. Which of the following affect the current price of a stock? I. dividend growth rate
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This note was uploaded on 04/05/2011 for the course FIN 350 taught by Professor Debruinne during the Winter '11 term at Grand Valley State University.

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Test 2 Sample Solution - Student Name: Test 2 (50 Minutes,...

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