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Exam 10: Bond Prices and Yields

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Question 41

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In an era of particularly low interest rates,which of the following bonds is most likely to be called?

A) Zero coupon bonds
B) Coupon bonds selling at a discount
C) Coupon bonds selling at a premium
D) Floating rate bonds

E) All of the above
F) B) and C)

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Question 42

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The primary difference between Treasury notes and bonds is ________.

A) maturity at issue
B) default risk
C) coupon rate
D) tax status

E) A) and B)
F) None of the above

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Question 43

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Consider a newly issued TIPS bond with a three year maturity, par value of $1000, and a coupon rate of 5%. Assume annual coupon payments. -What is the nominal rate of return on the TIPS bond in the first year?

A coupon bond which pays interest of $60 annually,has a par value of $1,000,matures in 5 years,and is selling today at a $84.52 discount from par value.The approximate yield to maturity on this bond is _________.

To earn a high rating from the bond rating agencies,a company would want to have _________. I.a low times interest earned ratio II.a low debt to equity ratio III.a high quick ratio

Assuming semiannual compounding,a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at _________.

A bond has a par value of $1,000,a time to maturity of 10 years,and a coupon rate of 8% with interest paid annually.If the current market price is $750,what is the approximate capital gain yield of this bond over the next year?

A convertible bond has a par value of $1,000 but its current market price is $950.The current price of the issuing company's stock is $19 and the conversion ratio is 40 shares.The bond's conversion premium is _________.

A 1% decline in yield will have the least effect on the price of the bond with a _________.

Consider the following $1,000 par value zero-coupon bonds: The expected one-year interest rate four years from now should be _________.

_______ bonds represent a novel way of obtaining insurance from capital markets against specified disasters.

The invoice price of a bond is the ______.

You buy a 10 year $1,000 par zero coupon bond priced to yield 6%.You do not sell the bond.If you are in a 28% tax bracket you will owe taxes on this investment after the first year equal to _______.

A callable bond pays annual interest of $60,has a par value of $1,000,matures in 20 years but is callable in 10 years at a price of $1,100,and has a value today of $1055.84.The yield to call on this bond is _________.

The yield to maturity of an 10-year zero coupon bond,with a par value of $1,000 and a market price of $625,is _____.

Sinking funds are commonly viewed as protecting the _______ of the bond.

Consider the following $1,000 par value zero-coupon bonds: The expected one-year interest rate two years from now should be _________.

A bond has a flat price of $985 and it pays an annual coupon.The last coupon payment was made 90 days ago.What is the invoice price if the annual coupon is $69?

Yields on municipal bonds are typically ___________ yields on corporate bonds of similar risk and time to maturity.

Which of the following possible provisions of a bond indenture is designed to ease the burden of principal repayment by spreading it out over several years?