test4 - Chapter 4Valuing Bonds MULTIPLE CHOICE 1 A 15 year...

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Chapter 4—Valuing Bonds MULTIPLE CHOICE 1. A 15 year, 8%, $1000 face value bond is currently trading at $958. The yield to maturity of this bond must be a. less than 8%. b. equal to 8%. c. greater than 8%. d. unknown. ANS: C DIF: E REF: 4.2 Bond Prices and Interest Rates 2. A bond that grants the investor the right to exchange their bonds for common stock, is called a 3. Of the following bonds, which one has the highest degree of interest rate risk? 4. Which of the following information cannot be found in a bond’s indenture? 5. Bonds issued by US states or local governments are called... a. Treasury bonds. b. Municipal bonds. c. Corporate bonds. d. Yankee bonds. ANS: B DIF: E REF: 4.3 Types of Bonds 6. Bavarian Sausage just issued a 10 year 7% coupon bond. The face value of the bond is $1,000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond’s price?
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7. Bavarian Sausage just issued a 10 year 7% coupon bond. The face value of the bond is $1,000 and the bond makes semiannual coupon payments. If the required return on the bond is 10%, what is the bond’s price? DIF: E REF: 4.2 Bond Prices and Interest Rates 8. Bavarian Sausage just issued a 10 year 12% coupon bond. The face value of the bond is $1,000 and the bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond’s price? DIF: E REF: 4.2 Bond Prices and Interest Rates 9. Bavarian Sausage just issued a 10 year 12% coupon bond. The face value of the bond is $1,000 and the bond makes semiannual coupon payments. If the required return on the bond is 10%, what is the bond’s price? a. $1,122.89 b. $815.26 c. $1,000.00 d. $1,124.62 ANS: D FV: 1000 PMT: 120/2 I/Y: 10/2 N: 10*2
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PV: 1124.62 DIF: E REF: 4.2 Bond Prices and Interest Rates 10. Bavarian Sausage just issued a 10 year 12% coupon bond. The face value of the bond is $1,000 and the bond makes annual coupon payments. If the bond is trading at $967.25, what is the bond’s yield to maturity? DIF: E REF: 4.2 Bond Prices and Interest Rates
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