Chapter 6 Sample Test Questions

# Chapter 6 Sample Test Questions - Chapter 6 Test Questions...

This preview shows pages 1–2. Sign up to view the full content.

Chapter 6 Test Questions Question 1 Which one of the following statements is correct concerning interest rate risk as it relates to bonds, all else equal? I. The shorter the time to maturity, the greater the interest rate risk. II. The higher the coupon rate, the greater the interest rate risk. III. For a bond selling at par value, there is no interest rate risk. IV. The lower the amount of each interest payment, the lower the interest rate risk. a. I only b. I and II only c. I and III only d. III and IV only e. None of the above Answer Question 1 Interest rate risk is the risk associated with the possible fluctuation in discount rates over time. The longer the bond and the smaller the coupon payments the greater the risk. Answer : E Question 2 Winston Enterprises has a 15-year bond issue outstanding that pays a 9 percent coupon. The bond is currently priced at \$894.60 and has a par value of \$1,000. Interest is paid semiannually. What is the yield to maturity?

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern