Chapter 6 Sample Test Questions

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

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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? a. 5.20 percent b. 10.13 percent c. 10.16 percent d. 10.40 percent e. None of the above Answer Question 2 For this we will use our financial calculator. N = 15*2 =30, PMT = 9%*$1000/2 = $45, FV = $1000, and
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This note was uploaded on 03/24/2012 for the course BUS M 301 taught by Professor Jimbrau during the Winter '11 term at BYU.

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

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