Chapter 005 - Valuing Bonds

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Chapter 005 - Valuing Bonds
38. The discount rate that makes the present value o a !ond"s pa#ments e$ual to its price is
termed the%
&. rate o return.
B. #ield to maturit#.
C. current #ield.
'. coupon rate.
3(. )hat is the coupon rate or a !ond *ith three #ears until maturit#+ a price o ,1+053.-6+
and a #ield to maturit# o 6./
&. 6.
B. 8.
C. 10.
'. 11.
-0. )hat is the #ield to maturit# or a !ond pa#ing ,100 annuall# that has si0 #ears until
maturit# and sells or ,1+000/
&. 6.0.
B. 8.5.
C. 10.0.
'. 11.5.
-1. )hat happens to the price o a three-#ear !ond *ith an 8. coupon *hen interest rates
change rom 8. to 6./
&. & price increase o ,51.5-
B. & price decrease o ,51.5-
C. & price increase o ,53.-2
'. 3o change in price
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Chapter 005 - Valuing Bonds
This represents a price change o ,53.-2+ since the !ond had sold or par.
-1. )hich o the ollo*ing actors *ill change *hen interest rates change/
&. The e0pected cash lo*s rom a !ond
B. The present value o a !ond"s pa#ments
C. The coupon pa#ment o a !ond
'. The maturit# value o a !ond
-3. )hat happens to the coupon rate o a !ond that pa#s ,80 annuall# in interest i interest
rates change rom (. to 10./
&. The coupon rate increases to 10..
B. The coupon rate remains at (..
C. The coupon rate remains at 8..
'. The coupon rate decreases to 8..
--. )hich o the ollo*ing is i0ed 4e.g.+ cannot change5 or the lie o a given !ond/
&. Current price.
B. Current #ield.
C. 6ield to maturit#.
D. Coupon rate.
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Chapter 005 - Valuing Bonds
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Chapter 005 - Valuing Bonds
-5. )hat is the rate o return or an investor *ho pa#s ,1+05-.-2 or a three-#ear !ond *ith a
2. coupon and sells the !ond one #ear later or ,1+032.1(/
A. 5.00.
B. 5.33.
C. 6.-6.
'. 2.00.
7ate o 7eturn 8 4,20.00 - ,12.1859,1+05-.-2
8 ,51.219,1+05-.-2
8 5.
-6. )hich o the ollo*ing is correct *hen a !ond investor"s rate o return or a particular
period e$uals the !ond"s coupon rate/
&. The !ond increased in price during the period.
B. The !ond decreased in price during the period.
C. The coupon pa#ment increased during the period.
D. The !ond price remained unchanged during the period.
-2. )hat is the relationship !et*een an investment"s rate o return and its #ield to maturit# or
an investor that does not hold a !ond until maturit#/
&. 7ate o return is lo*er than #ield to maturit#.
B. 7ate o return is higher than #ield to maturit#.
C. 7ate o return e$uals #ield to maturit#.
D. There is no predetermined relationship.
-8. : the coupon rate is lo*er than current interest rates+ then the #ield to maturit# *ill !e%
&. lo*er than current interest rates.
B. e$ual to the coupon rate.
C. higher than the coupon rate.
'. lo*er than the coupon rate.
-(. : a our #ear !ond *ith a 2. coupon and a 10. #ield to maturit# is currentl# *orth
,(0-.(0+ ho* much *ill it !e *orth one #ear rom no* i interest rates are constant/
&. , (0-.(0
B. , (15.3(
C. , (-2.(3
'. ,1+000.00
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Chapter 005 - Valuing Bonds
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