Exam2B Answer Key

Exam2B Answer Key - FIN350 Quiz 2 Friday First Name_ Last...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
FIN350 Quiz 2 Friday First Name___________ Last Name __________ Version B YTM=CGY+CY EVA = NOPAT – (After tax cost of capital) (Capital) 1. The face value of a bond is received by the bondholder: A) at the time of purchase. B) semi-annually or monthly. C) whenever coupon payments are made. D) at maturity. 2. How much would an investor expect to pay for a $1,000 par value bond with a 5% annual coupon that matures in 5 years if the interest rate is 8%? A) $844.41 B) $961.10 C) $1,082.00 D) $1,129.88 E) $880.22 3. Assume that the market interest rate does not change, which of the following is correct regarding a bond’s price if the bond is zero-coupon bond? The bond price will___ . (Hint: Is the price of a zero-coupon bond below par or above par?) A) increase over time, reaching par value at maturity. B) decline over time, reaching par value at maturity. C) be less than the face value at maturity. D) double the face value at maturity. 4. Which of the following is best described as a Treasury bill? A) A marketable U.S. government debt security with a maturity of 5 years when issued. B) A marketable debt security issued by the city of San Francisco with a maturity of 10 years. C) A marketable U.S. government debt security with a maturity of 180 days when issued. D) A marketable U.S. government debt security with a maturity of 15 years when issued. 5. What is the current yield of a bond with a 6% coupon, 7 year’s maturity, and a price of $980? A) 7.14% B) 6% C) 6.12% D) 5% E) 5.05% 6. If the Treasury yield curve is downward sloping, what is the yield to maturity on a 13-year Treasury bond, relative to that on a 2-year Treasury note? a. The yields on the two bonds are equal. b. The yield on a 13-year Treasury bond will always be higher than the yield on a 2- year Treasury note.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
c. It is impossible to tell without knowing the coupon rates of the bonds. d. The yield on the 13 year Treasury bond is less than the yield on a 2-year Treasury note. e.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 7

Exam2B Answer Key - FIN350 Quiz 2 Friday First Name_ Last...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online