349 mid summer2 2013 mc sol

A 25percent b 333percent c 20percent d 3percent 10

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Unformatted text preview: coupon bond selling for $5,000 D) A 12 percent coupon bond selling for $4,500 9) A discount bond selling for $15,000 with a face value of $20,000 in one year has a yield to 9) _______ maturity of ________. A) 25 percent B) 33.3 percent C) 20 percent D) 3 percent 10) What is the return on a 5 percent coupon bond that initially sells for $1,000 and sells for $900 next year? A) 10 percent B) -5 percent C) -10 percent D) 5 percent 11) If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, which bond would you prefer to have been holding? A) A bond with one year to maturity B) A bond with twenty years to maturity C) A bond with ten years to maturity D) A bond with five years to maturity 12) Everything else held constant, if the expected return on bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected return of corporate bonds ________ relative to bonds and the demand for corporate bonds ________. A) falls; falls B) falls; rises C) rises; rises D) rises; falls 13) During business cycle expansions when income and wealth...
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