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| 1 | |
What is the value of a $50,000 pure discount bond that matures in 15 years when the market interest rate is 6.5 percent? |
| | A) | $18,877.60 |
| | B) | $19,441.33 |
| | C) | $19,589.43 |
| | D) | $19,600.00 |
| | E) | $20,333.33 |
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| 2 | |
Which one of the following statements is true? |
| | A) | A pure discount bond is also called a zero coupon bond. |
| | B) | A two-year, $1,000 pure discount bond is worth less than a 5-year, $1,000 pure discount bond given a 5 percent market interest rate. |
| | C) | The price of a zero coupon bond is unaffected by the time to maturity. |
| | D) | A pure discount bond pays interest payments every 6 months. |
| | E) | The price of a bond is directly related to the market rate of interest. |
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| 3 | |
Generally speaking, U.S. government coupon bonds pay interest every _____ months while U.S. corporate bonds pay interest every _____ months. |
| | A) | 3; 3 |
| | B) | 3; 6 |
| | C) | 6; 3 |
| | D) | 6; 6 |
| | E) | 6; 12 |
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| 4 | |
What is the amount of each interest payment on an 8.5 percent, semiannual coupon bond if the face value of the bond is $1,000? |
| | A) | $4.25 |
| | B) | $8.50 |
| | C) | $21.25 |
| | D) | $42.50 |
| | E) | $85.00 |
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| 5 | |
A 7 percent, semiannual coupon bond has a $1,000 face value and matures in 11 years. What is the current value of this bond if the market rate of interest is 9.8 percent? |
| | A) | $814.03 |
| | B) | $887.16 |
| | C) | $892.04 |
| | D) | $911.11 |
| | E) | $928.82 |
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| 6 | |
Miller Brothers has bonds outstanding that mature in 14 years and pay a 6 percent semiannual coupon. What will the bond quote be for one of these bonds if the par value is $1,000 and market interest rate is 8.2 percent? |
| | A) | 78 |
| | B) | 81.88 |
| | C) | 67 |
| | D) | 80 |
| | E) | 23 |
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| 7 | |
A semiannual coupon bond pays interest payments of $42.50 each. What is the coupon rate if the face value of the bond is $1,000? |
| | A) | 13 percent |
| | B) | 25 percent |
| | C) | 8.50 percent |
| | D) | 75 percent |
| | E) | 00 percent |
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| 8 | |
Which one of the following bonds by definition has no maturity date? |
| | A) | zero coupon |
| | B) | U.S. government |
| | C) | consol |
| | D) | coupon |
| | E) | par value |
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| 9 | |
The value of a pure discount bond will _____ when the market rate of interest increases, all else constant. |
| | A) | be unaffected |
| | B) | increase |
| | C) | decrease |
| | D) | either be unaffected or increase, depending on the time to maturity |
| | E) | either be unaffected or decrease, depending on the time to maturity |
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| 10 | |
Which one of the following statements is true? |
| | A) | The coupon rate of a discount bond exceeds the bond's YTM. |
| | B) | If the YTM is equal to the coupon rate, the bond will sell at a discount. |
| | C) | A premium bond has a YTM that exceeds the coupon rate. |
| | D) | A par value bond has a YTM that is less than the coupon rate. |
| | E) | A premium bond has a YTM that is less than the coupon rate. |
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