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# Exam2A Answer Key Wed Class - FIN350 Quiz 2 Wednesday First...

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FIN350 Quiz 2 Wednesday First Name___________ Last Name _______ Version A YTM=CGY+CY 1. If a bond issued by First Boston Bank has a Standard & Poor's credit rating of BBB, it is referred to as a(n) ___ . a. High yield bond b. Investment grade bond. c. James Bond. d. Junk bond e. Barry's bond 2. How much would an investor expect to pay for a \$1,000 par value bond with a 9% annual coupon that matures in 7 years if the interest rate is 5%? A) \$696.74 B) \$798.68 C) \$1,082.00 D) \$1,231.45 E) \$1,139.93 3. Which of the following bonds would be likely to exhibit a greater degree of interest-rate risk? That is, which bond's price will be most sensitive to changes in interest rate? A) A floating-rate bond with 20 years until maturity. B) A coupon-paying bond with 24 years until maturity. C) A zero-coupon bond with 25 years until maturity. D) A zero-coupon bond with 23 years until maturity. E) A treasury bill with 3 months until maturity. 4. What is the current yield of a bond of 4 years maturity with a 4% coupon and a price of \$950? A) 4% B) 16% C) 4.2% D) 4.4% E) 9.5% 5. Find the yield to maturity and the capital gains yield for a 9-year, 10% annual coupon bond that sells for \$900, and has a face value of \$1,000. A) 11.11%;0.67% B) 10%; 0% C) 9.5%;0.76% D)11.75%;0.64% E)11.87%;0.76% 6. If currently the Treasury yield curve is a normal yield curve, what is the yield to maturity on a 13-year Treasury bond, relative to that on a 2-year Treasury note? FIN350 Li 1

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a. The yields on the two bonds are equal. b. The yield on a 13-year Treasury bond is lower than the yield on a 2-year Treasury note. c. The yield on the 13-year Treasury bond is higher than the yield on a 2-year Treasury note. d. It is impossible to tell without knowing the relative default risks of the two Treasury bonds. 7. In a liquidation process, priority of claims should be paid in the following order: A)Trustee’s costs Secured creditors from sales of secured assets.
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Exam2A Answer Key Wed Class - FIN350 Quiz 2 Wednesday First...

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