A corporate bond's coupon rate is the annual coupon payment divided by:
the bond's face value.
the bond's current price.
$100.
the bond's maturity period. correct answers The bond's face value
University Corp. issued five-year bonds that pay a coupon of 6.5 percent semiannually. The current ...
Finc 301 Exam 3 || All Answers Are Correct 100%.
A corporate bond's coupon rate is the annual coupon payment divided by:
the bond's face value.
the bond's current price.
$100.
the bond's maturity period. correct answers The bond's face value
University Corp. issued five-year bonds that pay a coupon of 6.5 percent semiannually. The
current market rate for similar bonds is 5.5 percent. How much will you be willing to pay for the
bond today? Do not round intermediate calculations. Round your answer to the nearest dollar.
$1,043
$1,023
$1,000
$958 correct answers $1043
In order to calculate the price of a bond, which of the following input is needed?
Sinking fund status.
Dividend rate.
Credit rating.
Maturity period. correct answers Maturity period
Three years ago, Joe bought a 5-year, 10% coupon paid semiannually bond for $1000. Currently,
with interest rates having risen sharply, the bond is selling for $800 and you decide to sell it off.
If you had re-invested the semi-annual coupons as you received them, what would your realized
yield be over the 3-year holding period? Round to two decimal places.
12%.
6%.
10%.
3.63%. correct answers 3.63%
In regard to interest rate risk, short-term bonds:
have less interest rate risk than longer-term bonds.
have more interest rate risk than longer-term bonds.
and longer-term bonds have the same amount of interest rate risk because their coupon interest
rates are fixed.
and longer-term bonds have no interest rate risk because their coupon interest rates are fixed.
correct answers Have less interest rate risk than longer term bonds
Bonds sell at a discount when the market rate of interest is:
less than the bond's coupon rate.
greater than the bond's coupon rate.
equal to the bond's coupon rate.
,none of the above is true. correct answers Greater than the bond's coupon rate
Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent. The interest rate for similar
bonds is currently 9 percent. Assuming annual payments, what is the present value of the bond?
(Do not round intermediate computations. Round your final answer to the nearest dollar.)
$1,066
$990
$945
$872 correct answers $872
Jane Thorpe has been offered a seven-year bond issued by Barone, Inc., for a price of $943.22.
The bond has a coupon rate of 9 percent and pays the coupon semiannually. Similar bonds in the
market have a yield to maturity of 10 percent today. Should she buy the bonds at the offered
price? (Do not round intermediate computations. Round your final answer to the nearest dollar.)
Yes, the bond is worth more at $951.
No, the bond is only worth $912.
No, the bond is only worth $921.
Yes, the bond is worth more at $1,015. correct answers Yes the bond is worth more at $951
Jeremy Kohn is planning to invest in a 10-year bond that pays a 12 percent coupon. The current
market rate for similar bonds is 9 percent. Assume semiannual coupon payments. What is the
maximum price that should be paid for this bond? (Do not round intermediate computations.
Round your final answer to the nearest dollar.)
$951
$1,033
$1,195
$882 correct answers $1195
Which one of the following statements is true of a bond's yield to maturity?
The yield to maturity of a bond is the discount rate that makes the present value of the coupon
and principal payments equal to the price of the bond.
It is the annual yield that the investor earns if the bond is held to maturity, and all the coupon and
principal payments are made as promised.
A bond's yield to maturity changes daily as interest rates increase or decrease.
All of the above are true. correct answers All of the above are true
Nathan Akpan is planning to invest in a seven-year bond that pays annual coupons at a rate of 7
percent. It is currently selling at $927.23. What is the current market yield on this bond? (Round
to the closest answer.)
9.5%
8.4%
7.5%
10.4% correct answers 8.4%
, Shawna Carter wants to invest her recent bonus in a four-year bond that pays a coupon of 11
percent semiannually. The bonds are selling at $962.13 today. If she buys this bond and holds it
to maturity, what would be her yield? (Round to the closest answer.)
11.5%
12.2%
12.5%
11.8% correct answers 12.2%
John Wong purchased a five-year bond today at $1,034.66. The bond pays 6.5 percent
semiannually. What will be his yield to maturity? (Round to the closest answer.)
3.25%
5.7%
6.7%
6.2% correct answers 5.7%
Which of the following statements is true?
If investors believe inflation will be subsiding in the future, the prevailing yield curve will have a
positive slope.
The longer the maturity of a security, the greater its interest rate risk.
The real rate of interest varies with the business cycle, with the lowest rates at the end of a period
of business expansion and the highest at the bottom of a recession.
The interest rate risk premium always adds a downward bias to the slope of the yield curve.
correct answers The longer the maturity of a security the greater its interest rate risk
The three economic factors that affect the shape of the yield curve are:
the nominal rate of interest, the expected rate of inflation, and default risk.
the real rate of interest, the nominal rate of interest, and currency risk.
the real rate of interest, the expected rate of inflation, and interest rate risk.
the real rate of interest, the expected rate of inflation, and marketability. correct answers The real
rte of interest, the expected rate of inflation, and interest rate risk
A bond pays a coupon interest rate of 7.5 percent. The market rate on similar bonds is 8.4
percent. The bond will sell at _____.
a premium
a discount
par
book value correct answers A discount
The price of a bond is calculated by:
adding the present value of the principal payment and the present value of coupon payments.
subtracting the present value of principal payment from the present value of coupon payments.
discounting the difference between the principal payment and the coupon payments.
discounting the sum of coupon payments and principal. correct answers Adding the present value
of the principal payments and the present value of coupon payments
A bond's coupon rate is defined as:
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