Question 1

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Accepted Answer

A)  5.60 percent
B)  5.67 percent
C)  4.05 percent
D)  6.00 percent
E)  6.21 percentF) A) and B)
G) A) and C)

Question 2

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

Accepted Answer

A)  1.60 percent
B)  2.37 percent
C)  6.32 percent
D)  6.49 percent
E)  6.88 percentF) B) and C)
G) All of the above

Question 3

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Accepted Answer

A)  12.26 years
B)  12.53 years
C)  18.49 years
D)  24.37 years
E)  25.05 yearsF) None of the above
G) A) and D)

Question 4

Which of the following relationships apply to a par value bond?
I.coupon rate < yield-to-maturity
II.current yield = yield-to-maturity
III.market price = call price
IV.market price = face value

Accepted Answer

A)  I and II only
B)  I and III only
C)  II and IV only
D)  I, II, and III only
E)  II, III, and IV onlyF) A) and D)
G) C) and E)

Question 5

Which one of the following statements concerning bond ratings is correct?

Accepted Answer

A)  Investment grade bonds are rated BB or higher by Standard & Poor's.
B)  Bond ratings assess both interest rate risk and default risk.
C)  Split rated bonds are called crossover bonds.
D)  The highest rating issued by Moody's is AAA.
E)  A "fallen angel" is a term applied to all "junk" bonds.F) A) and B)
G) C) and D)

Question 6

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

Accepted Answer

A)  4.67 percent
B)  4.78 percent
C)  5.08 percent
D)  5.33 percent
E)  5.54 percentF) D) and E)
G) All of the above

Question 7

Texas Foods has a 6 percent bond issue outstanding that pays $30 in interest every March and September.The bonds are investment grade and sell at par.The bonds are callable at a price equal to the present value of all future interest and principal payments discounted at a rate equal to the comparable Treasury rate plus 0.50 percent.Which of the following correctly describe the features of this bond?
I.bond rating of B
II."make whole" call price
III.$1,000 face value
IV.offer price of $1,000

Accepted Answer

A)  I and III only
B)  III and IV only
C)  I, III, and IV only
D)  II, III, and IV only
E)  I, II, III, and IVF) C) and D)
G) A) and E)

Question 8

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

Accepted Answer

A)  zero coupon
B)  callable
C)  senior
D)  collateralized
E)  unsecuredF) A) and B)
G) C) and D)

Question 9

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Accepted Answer

A)  risk-free rate
B)  realized rate
C)  nominal rate
D)  real rate
E)  current rateF) C) and E)
G) B) and C)

Exam 7: Interest Rates and Bond Valuation

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Correct Answer
verified

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

Correct Answer
verified

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Correct Answer
verified

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

Correct Answer
verified

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Correct Answer
verified

Which one of the following statements concerning bond ratings is correct?

Correct Answer
verified

Correct Answer
verified

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

Correct Answer
verified

Which of the following relationships apply to a par value bond? I.coupon rate < yield-to-maturity II.current yield = yield-to-maturity III.market price = call price IV.market price = face value

Correct Answer
verified

Exam 7: Interest Rates and Bond Valuation

Global Communications has a 7 percent,semiannual coupon bond outstanding with a current market price of $1,023.46.The bond has a par value of $1,000 and a yield to maturity of 6.72 percent.How many years is it until this bond matures?

Correct AnswerverifiedShow Answer

The outstanding bonds of The River Front Ferry carry a 6.5 percent coupon.The bonds have a face value of $1,000 and are currently quoted at 102.9.What is the current yield on these bonds?

Correct AnswerverifiedShow Answer

An investment offers a 10.5 percent total return over the coming year.Sam Bernanke thinks the total real return on this investment will be only 6.2 percent.What does Sam believe the inflation rate will be for the next year?

Correct AnswerverifiedShow Answer

A bond that can be paid off early at the issuer's discretion is referred to as being which one of the following?

Correct AnswerverifiedShow Answer

Which one of the following rates represents the change,if any,in your purchasing power as a result of owning a bond?

Correct AnswerverifiedShow Answer

Which one of the following statements concerning bond ratings is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Blackwell bonds have a face value of $1,000 and are currently quoted at 98.4.The bonds have a 5 percent coupon rate.What is the current yield on these bonds?

Correct AnswerverifiedShow Answer

Which of the following relationships apply to a par value bond? I.coupon rate < yield-to-maturity II.current yield = yield-to-maturity III.market price = call price IV.market price = face value

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified