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

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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 a. zero-coupon bond. b. Treasury bond. c. convertible bond. d. mortgage bond. ANS: C DIF: E REF: 4.3 Types of Bonds 3. Of the following bonds, which one has the highest degree of interest rate risk? a. 20 year 8% bond b. 5 year 8% bond c. 10 year 8% bond d. Not enough information. ANS: A DIF: E REF: 4.2 Bond Prices and Interest Rates 4. Which of the following information cannot be found in a bond’s indenture? a. The coupon rate. b. The maturity of the bond. c. The price of the bond. d. None of the above. ANS: C DIF: E REF: 4.3 Types of Bonds 5. Bonds issued by US states or local governments are called. .. a. Treasury bonds. b. Municipal bonds.

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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? a. \$815.66 b. \$923.67 c. \$1,000.00 d. \$1,256.35 ANS: A FV:1000 PMT: 70 I/Y: 10 N: 10 PV: 815.66 DIF: E REF: 4.2 Bond Prices and Interest Rates 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? a. \$815.66 b. \$1,000 c. \$813.07 d. \$1,035.27 ANS: C FV: 1000 PMT: 70/2 I/Y: 10/2 N: 10*2 PV: 813.07 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? a. \$815.16 b. \$1,000 c. \$1,122.89
d. \$1067.24 ANS: C FV: 1000 PMT: 120 I/Y: 10 N: 10 PV: 1122.89 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 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 ma- turity? a.

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## This note was uploaded on 03/18/2012 for the course FINA 3383 taught by Professor Lovell during the Fall '10 term at Texas Pan American.

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

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