2-A 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is CORRECT?
a-The bond’s coupon rate exceeds its current yield.
b-The bond’s current yield exceeds its yield to maturity.
c-The bond’s yield to maturity is greater than its coupon rate.
d-The bond’s current yield is equal to its coupon rate.
e-If the yield to maturity stays constant until the bond matures, the bond’s price will remain at $850.
3-Ezzell Enterprises’ noncallable bonds currently sell for $1,165. They have a 15-year maturity, an annual coupon of $95, and a par value of $1,000. What is their yield to maturity?
4-year Treasury bonds yield 5.5%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on five-year bonds is 0.4%. What is the real risk-free rate, r*?
5-Assume that the risk-free rate remains constant, but the market risk premium declines. Which of the following is most likely to occur?
a-The required return on a stock with beta = 1.0 will not change.
b-The required return on a stock with beta > 1.0 will increase.
c-The return on "the market" will remain constant.
d-The return on "the market" will increase.
e-The required return on a stock with beta < 1.0 will decline
This question was asked on Jan 25, 2011 and answered on Jan 26, 2011.
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