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| 1 | |
If the annual interest rate is 5% (.05), the price of a one year Treasury bill would be: (Hint: T-Bills have $100 face value) |
| | A) | $95.00 |
| | B) | $97.50 |
| | C) | $95.24 |
| | D) | $96.10 |
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| 2 | |
If the annual interest rate is 5%, the price of a three-month Treasury bill would be: (Hint: T-Bills have $100 face value) |
| | A) | $98.79 |
| | B) | $95.00 |
| | C) | $98.75 |
| | D) | $97.59 |
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| 3 | |
If a consol is offering an annual coupon of $50 and the annual interest rate is 6%, the price of the consol is: |
| | A) | $47.17 |
| | B) | $813.00 |
| | C) | $833.33 |
| | D) | None of the above |
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| 4 | |
A $1000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has: |
| | A) | A current yield equal to 6.22%. |
| | B) | A current yield equal to 6.00%. |
| | C) | A coupon rate equal to 6.22%. |
| | D) | A yield to maturity and current yield equal to 6.00%. |
| | E) | A yield to maturity and coupon rate equal to 6.00%. |
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| 5 | |
A $1000 face value bond, with an annual coupon of $40, one year to maturity and a purchase price of $980: |
| | A) | Has a current yield that equals 4.00%. |
| | B) | Has a coupon rate that equals 4.80%. |
| | C) | Has a current yield that equals 4.08% and a yield to maturity that equals 6.12%. |
| | D) | Has a current yield that equals 4.08% and a yield to maturity that equals 4.0%. |
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| 6 | |
If a one year bond has a face value of $100 and is purchased for $94, and is held to maturity: |
| | A) | The holding period return will equal the yield to maturity. |
| | B) | The yield to maturity will exceed the holding period return. |
| | C) | The yield to maturity will be 6.38%. |
| | D) | a and c. |
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| 7 | |
A 30-year Treasury bond as a face value of $1,000, price of $1,200 with a $50 coupon payment. Assume the price of this bond decreases to $1,100 over the next year. The one-year holding period return is equal to: |
| | A) | -9.17% |
| | B) | -8.33% |
| | C) | -4.17% |
| | D) | -3.79% |
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| 8 | |
If a one-year zero-coupon bond has a face value of $100, is purchased for $94, and is held to maturity: |
| | A) | The holding period return will exceed the yield to maturity. |
| | B) | The yield to maturity will exceed the holding period return. |
| | C) | The yield to maturity will be 6.38%. |
| | D) | The holding period return will be 6.38%. |
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| 9 | |
Consider a zero-coupon bond with a $1,100 payment in one year. Suppose the interest rate decreases from 10% to 8%. The price of this bond: |
| | A) | Increases from $1,000 to $1,018. |
| | B) | Increases from $1,000 to $1,375. |
| | C) | Decreases from $110 to $88. |
| | D) | Decreases from $1,210 to $1,188. |
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| 10 | |
Consider a $1,000 face value bond with a $55 coupon payment and 1 year to maturity. Calculate the current yield, coupon rate and the yield to maturity if the bond is purchased for $940. |
| | A) | Current yield = 5.50%, coupon rate = 5.50%, yield to maturity = 12.23%. |
| | B) | Current yield = 5.85%, coupon rate = 5.50%, yield to maturity = 12.23%. |
| | C) | Current yield = 5.85%, coupon rate = 5.00%, yield to maturity = 6.38%. |
| | D) | Current yield = 5.50%, coupon rate = 5.00%, yield to maturity = 6.38%. |
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| 11 | |
Consider a $1,000 face value bond with a $55 coupon payment and 1 year to maturity. Calculate the current yield, coupon rate and the yield to maturity if the bond is purchased for $1,130. |
| | A) | Current yield = 5.50%, coupon rate = 4.87%, yield to maturity = 5.00%. |
| | B) | Current yield = 5.50%, coupon rate = 5.50%, yield to maturity = -6.64%. |
| | C) | Current yield = 4.87%, coupon rate = 5.50%, yield to maturity = -6.64%. |
| | D) | Current yield = 4.87%, coupon rate = 5.00%, yield to maturity = -5.00%. |
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| 12 | |
If the U.S. government's borrowing needs increase, all other factors constant: |
| | A) | The demand for bonds will decrease. |
| | B) | The price of bonds will increase. |
| | C) | The supply of bonds will increase. |
| | D) | The yields on bonds will decrease. |
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| 13 | |
Consider a two-year, 4.5% coupon bond with a $500 face value that is originally purchased for $475. Calculate the holding period return of this bond if it is sold after one year at a price of $485. |
| | A) | 6.84% |
| | B) | 6.50% |
| | C) | 11.58% |
| | D) | 3.05% |
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| 14 | |
Consider a two-year, 8% coupon bond with a $1,500 face value that is originally purchased for $1,490. Calculate the holding period return of this bond if it is sold after one year at a price of $1,505. |
| | A) | 8.67% |
| | B) | 9.06% |
| | C) | 1.54% |
| | D) | 6.38% |
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| 15 | |
If the risk on foreign government bonds increases relative to U.S. government bonds, the price of U.S. government bonds should: |
| | A) | Not change since U.S. government bonds are free of default risk. |
| | B) | Decrease since people will bail out of all government bonds. |
| | C) | Increase as the demand for these bonds increases. |
| | D) | Not be affected because the two types of bonds are traded in different markets. |
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