Multiple Choice Questions
1.
The current yield on a bond is equal to ________.
A)
annual interest divided by the current market price
B)
the yield to maturity
C)
annual interest divided by the par value
D)
the internal rate of return
E)
none of the above
Answer: A
Difficulty: Easy
2.
If a 7% coupon bond is trading for $975.00, it has a current yield of ____________ percent.
3.
If a 6% coupon bond is trading for $950.00, it has a current yield of ____________ percent.
4.
If an 8% coupon bond is trading for $1025.00, it has a current yield of ____________ percent.
5.
If a 7.5% coupon bond is trading for $1050.00, it has a current yield of ____________ percent.
A)
7.0
B)
7.4
C)
7.1
D)
6.9
E)
6.7
Answer: C
Difficulty: Easy
Rationale: 75/1050 = 7.1.
6.
A coupon bond pays annual interest, has a par value of $1,000, matures in 4 years, has a coupon rate of 10%, and has a yield to maturity of
12%.
The current yield on this bond is ___________.
7.
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity
of 12%.
The current yield on this bond is ___________.
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8.
Of the following four investments, ________ is considered the safest.
9.
To earn a high rating from the bond rating agencies, a firm should have
A)
a low times interest earned ratio
B)
a low debt to equity ratio
C)
a high quick ratio
D)
B and C
E)
A and C
Answer: D
Difficulty: Easy
10.
At issue, coupon bonds typically sell ________.
11.
Accrued interest
12.
The
invoice price
of a bond that a buyer would pay is equal to
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 Spring '11
 Sam
 Finance, Interest Rates, Interest

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