Bond - 1. 2. 3. 4. 5. 6. 7. 8. Longer-term bond prices are...

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1. Longer-term bond prices are more sensitive to changes in interest rates than are short- term bond prices. A) True B) False 2. A Treasury bond's bid price will be lower than the ask price. A) True B) False 3. Which of the following presents the correct relationship? As the coupon rate of a bond increases, the bond's: A) face value increases. B) current price decreases. C) interest payments increase. D) maturity date is extended. 4. What happens when a bond's expected cash flows are discounted at a rate lower than the bond's coupon rate? A) The price of the bond increases. B) The coupon rate of the bond increases. C) The par value of the bond decreases. D) The coupon payments will be adjusted to the new discount rate. 5. When an investor purchases a $1,000 par value U.S. Treasury bond that was quoted at 97.16, the investor: A) receives 97.5% of the stated coupon payments. B) receives $975 upon the maturity date of the bond. C) pays 97.5% of face value for the bond. D) pays $1,025 for the bond. 6. How much should you pay for a $1,000 bond with 10% coupon, annual payments, and five years to maturity if the interest rate is 12%? A) $927.90 B) $981.40 C) $1,000.00 D) $1,075.82 7. The current yield of a bond can be calculated by: A) multiplying the price by the coupon rate. B) dividing the price by the annual coupon payments. C) dividing the price by the par value. D)
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This note was uploaded on 10/18/2011 for the course NO NAME no name taught by Professor Noname during the Spring '11 term at Oxford Brookes.

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Bond - 1. 2. 3. 4. 5. 6. 7. 8. Longer-term bond prices are...

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