Question 1

Convertible bonds

Accepted Answer

A)  give their holders the ability to share in price appreciation of the underlying stock.
B)  offer lower coupon rates than similar nonconvertible bonds.
C)  offer higher coupon rates than similar nonconvertible bonds.
D)  both A and B are true.
E)  both A and C are true.F) B) and D)
G) A) and B)

Question 2

A coupon bond pays annual interest,has a par value of $1,000,matures in 12 years,has a coupon rate of 8.7%,and has a yield to maturity of 7.9%.The current yield on this bond is ___________.

Accepted Answer

A)  8.39%
B)  8.43%
C)  8.83%
D)  8.66%
E)  none of the aboveF) A) and B)
G) C) and E)

Question 3

A convertible bond has a par value of $1,000 and a current market price of $850.The current price of the issuing firm's stock is $29 and the conversion ratio is 30 shares.The bond's market conversion value is ______.

Accepted Answer

A)  $729
B)  $810
C)  $870
D)  $1,000
E)  none of the aboveF) A) and C)
G) B) and E)

Question 4

The invoice price of a bond that a buyer would pay is equal to

Accepted Answer

A)  the asked price plus accrued interest.
B)  the asked price less accrued interest.
C)  the bid price plus accrued interest.
D)  the bid price less accrued interest.
E)  the bid price.F) C) and D)
G) A) and B)

Question 5

If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago,the accrued interest would be

Accepted Answer

A)  27.69
B)  27.35
C)  26.77
D)  27.98
E)  28.15F) B) and C)
G) C) and E)

Question 6

A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%,the invoice price of the bond will be ____________.

Accepted Answer

A)  $1,087.50
B)  $1,110.10
C)  $1,150.00
D)  $1,160.25
E)  none of the aboveF) A) and E)
G) All of the above

Question 7

A bond has a par value of $1,000,a time to maturity of 20 years,a coupon rate of 10% with interest paid annually,a current price of $850 and a yield to maturity of 12%.Intuitively and without the use calculations,if interest payments are reinvested at 10%,the realized compound yield on this bond must be ________.

Accepted Answer

A)  10.00%
B)  10.9%
C)  12.0%
D)  12.4%
E)  none of the aboveF) A) and B)
G) A) and C)

Question 8

A coupon bond that pays interest of $40 semi annually has a par value of $1,000,matures in 4 years,and is selling today at a $36 discount from par value.The yield to maturity on this bond is __________.

Accepted Answer

A)  8.69%
B)  9.09%
C)  10.43%
D)  9.76%
E)  none of the aboveF) None of the above
G) B) and E)

Question 9

Ceteris paribus,the price and yield on a bond are

Accepted Answer

A)  positively related.
B)  negatively related.
C)  sometimes positively and sometimes negatively related.
D)  not related.
E)  indefinitely related.F) C) and D)
G) A) and B)

Question 10

A coupon bond that pays interest annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 9.3%.The intrinsic value of the bond today will be ______ if the coupon rate is 8.5%.

Accepted Answer

A)  $712.99
B)  $960.14
C)  $1,123.01
D)  $886.28
E)  $1,000.00F) B) and D)
G) None of the above

Question 11

A coupon bond pays interest semi-annually,matures in 5 years,has a par value of $1,000 and a coupon rate of 12%,and an effective annual yield to maturity of 10.25%.The price the bond should sell for today is ________.

Accepted Answer

A)  $922.77
B)  $924.16
C)  $1,075.80
D)  $1,077.20
E)  none of the aboveF) A) and B)
G) A) and C)

Question 12

The _________ gives the number of shares for which each convertible bond can be exchanged.

Accepted Answer

A)  conversion ratio
B)  current ratio
C)  P/E ratio
D)  conversion premium
E)  convertible floorF) A) and B)
G) All of the above

Question 13

Altman's Z scores are assigned based on a firm's financial characteristics and are used to predict

Accepted Answer

A)  required coupon rates for new bond issues.
B)  bankruptcy risk.
C)  the likelihood of a firm becoming a takeover target.
D)  the probability of a bond issue being called.
E)  none of the above.F) A) and D)
G) B) and D)

Question 14

Consider a $1,000 par value 20-year zero coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%,the imputed interest income for the first year of that bond is

Accepted Answer

A)  zero.
B)  $14.87.
C)  $45.85.
D)  $7.44.
E)  none of the above.F) All of the above
G) A) and E)

Question 15

The ________ is used to calculate the present value of a bond.

Accepted Answer

A)  nominal yield
B)  current yield
C)  yield to maturity
D)  yield to call
E)  none of the aboveF) A) and B)
G) A) and E)

Question 16

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 11%.The intrinsic value of the bond today will be __________ if the coupon rate is 8.8%.

Accepted Answer

A)  $922.78
B)  $894.51
C)  $1,075.80
D)  $1,077.20
E)  none of the aboveF) B) and E)
G) A) and B)

Question 17

A convertible bond has a par value of $1,000 and a current market value of $850.The current price of the issuing firm's stock is $27 and the conversion ratio is 30 shares.The bond's conversion premium is _________.

Accepted Answer

A)  $40
B)  $150
C)  $190
D)  $200
E)  none of the aboveF) B) and D)
G) C) and E)

Question 18

If a 7.25% coupon bond is trading for $982.00,it has a current yield of ____________ percent.

Accepted Answer

A)  7.38
B)  6.53
C)  7.25
D)  8.53
E)  7.18F) A) and D)
G) D) and E)

Question 19

Consider two bonds,F and G.Both bonds presently are selling at their par value of $1,000.Each pays interest of $90 annually.Bond F will mature in 15 years while bond G will mature in 26 years.If the yields to maturity on the two bonds change from 9% to 10%,____________.

Accepted Answer

A)  both bonds will increase in value,but bond F will increase more than bond G
B)  both bonds will increase in value,but bond G will increase more than bond F
C)  both bonds will decrease in value,but bond F will decrease more than bond G
D)  both bonds will decrease in value,but bond G will decrease more than bond F
E)  none of the aboveF) B) and E)
G) B) and C)

Question 20

A coupon bond that pays interest of $100 annually has a par value of $1,000,matures in 5 years,and is selling today at a $72 discount from par value.The yield to maturity on this bond is __________.

Accepted Answer

A)  6.00%
B)  8.33%
C)  12.00%
D)  60.00%
E)  none of the aboveF) A) and D)
G) A) and C)

Exam 14: Bond Prices and Yields

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 11%.The intrinsic value of the bond today will be __________ if the coupon rate is 8.8%.

Correct Answer
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A coupon bond pays annual interest,has a par value of $1,000,matures in 12 years,has a coupon rate of 8.7%,and has a yield to maturity of 7.9%.The current yield on this bond is ___________.

Correct Answer
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A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%,the invoice price of the bond will be ____________.

Correct Answer
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The invoice price of a bond that a buyer would pay is equal to

Correct Answer
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A convertible bond has a par value of $1,000 and a current market price of $850.The current price of the issuing firm's stock is $29 and the conversion ratio is 30 shares.The bond's market conversion value is ______.

Correct Answer
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A coupon bond that pays interest of $100 annually has a par value of $1,000,matures in 5 years,and is selling today at a $72 discount from par value.The yield to maturity on this bond is __________.

Correct Answer
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Convertible bonds

Correct Answer
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If a 7.25% coupon bond is trading for $982.00,it has a current yield of ____________ percent.

Correct Answer
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Consider a $1,000 par value 20-year zero coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%,the imputed interest income for the first year of that bond is

Correct Answer
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The _________ gives the number of shares for which each convertible bond can be exchanged.

Correct Answer
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A coupon bond that pays interest of $40 semi annually has a par value of $1,000,matures in 4 years,and is selling today at a $36 discount from par value.The yield to maturity on this bond is __________.

Correct Answer
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A convertible bond has a par value of $1,000 and a current market value of $850.The current price of the issuing firm's stock is $27 and the conversion ratio is 30 shares.The bond's conversion premium is _________.

Correct Answer
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A coupon bond that pays interest annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 9.3%.The intrinsic value of the bond today will be ______ if the coupon rate is 8.5%.

Correct Answer
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Correct Answer
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Altman's Z scores are assigned based on a firm's financial characteristics and are used to predict

Correct Answer
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A coupon bond pays interest semi-annually,matures in 5 years,has a par value of $1,000 and a coupon rate of 12%,and an effective annual yield to maturity of 10.25%.The price the bond should sell for today is ________.

Correct Answer
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Ceteris paribus,the price and yield on a bond are

Correct Answer
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If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago,the accrued interest would be

Correct Answer
verified

Consider two bonds,F and G.Both bonds presently are selling at their par value of $1,000.Each pays interest of $90 annually.Bond F will mature in 15 years while bond G will mature in 26 years.If the yields to maturity on the two bonds change from 9% to 10%,____________.

Correct Answer
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The ________ is used to calculate the present value of a bond.

Correct Answer
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Exam 14: Bond Prices and Yields

A coupon bond that pays interest semi-annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 11%.The intrinsic value of the bond today will be __________ if the coupon rate is 8.8%.

Correct AnswerverifiedShow Answer

A coupon bond pays annual interest,has a par value of $1,000,matures in 12 years,has a coupon rate of 8.7%,and has a yield to maturity of 7.9%.The current yield on this bond is ___________.

Correct AnswerverifiedShow Answer

A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the Wall Street Journal.If the last interest payment was made one month ago and the coupon rate is 9%,the invoice price of the bond will be ____________.

Correct AnswerverifiedShow Answer

The invoice price of a bond that a buyer would pay is equal to

Correct AnswerverifiedShow Answer

A convertible bond has a par value of $1,000 and a current market price of $850.The current price of the issuing firm's stock is $29 and the conversion ratio is 30 shares.The bond's market conversion value is ______.

Correct AnswerverifiedShow Answer

A coupon bond that pays interest of $100 annually has a par value of $1,000,matures in 5 years,and is selling today at a $72 discount from par value.The yield to maturity on this bond is __________.

Correct AnswerverifiedShow Answer

Convertible bonds

Correct AnswerverifiedShow Answer

If a 7.25% coupon bond is trading for $982.00,it has a current yield of ____________ percent.

Correct AnswerverifiedShow Answer

Consider a $1,000 par value 20-year zero coupon bond issued at a yield to maturity of 10%.If you buy that bond when it is issued and continue to hold the bond as yields decline to 9%,the imputed interest income for the first year of that bond is

Correct AnswerverifiedShow Answer

The _________ gives the number of shares for which each convertible bond can be exchanged.

Correct AnswerverifiedShow Answer

A coupon bond that pays interest of $40 semi annually has a par value of $1,000,matures in 4 years,and is selling today at a $36 discount from par value.The yield to maturity on this bond is __________.

Correct AnswerverifiedShow Answer

A convertible bond has a par value of $1,000 and a current market value of $850.The current price of the issuing firm's stock is $27 and the conversion ratio is 30 shares.The bond's conversion premium is _________.

Correct AnswerverifiedShow Answer

A coupon bond that pays interest annually has a par value of $1,000,matures in 7 years,and has a yield to maturity of 9.3%.The intrinsic value of the bond today will be ______ if the coupon rate is 8.5%.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Altman's Z scores are assigned based on a firm's financial characteristics and are used to predict

Correct AnswerverifiedShow Answer

A coupon bond pays interest semi-annually,matures in 5 years,has a par value of $1,000 and a coupon rate of 12%,and an effective annual yield to maturity of 10.25%.The price the bond should sell for today is ________.

Correct AnswerverifiedShow Answer

Ceteris paribus,the price and yield on a bond are

Correct AnswerverifiedShow Answer

If a 9% coupon bond that pays interest every 182 days paid interest 112 days ago,the accrued interest would be

Correct AnswerverifiedShow Answer

Consider two bonds,F and G.Both bonds presently are selling at their par value of $1,000.Each pays interest of $90 annually.Bond F will mature in 15 years while bond G will mature in 26 years.If the yields to maturity on the two bonds change from 9% to 10%,____________.

Correct AnswerverifiedShow Answer

The ________ is used to calculate the present value of a bond.

Correct AnswerverifiedShow Answer

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