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Exam 10: Bond Prices and Yields

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Question 21

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A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000.If the bond matures in 16 years,it should sell for a price of __________ today.

A) $458.00
B) $641.00
C) $789.00
D) $1,100.00

E) A) and C)
F) A) and B)

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Question 22

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Analysis of bond returns over a multiyear horizon based on forecasts of the bond's yield to maturity and reinvestment rate of coupons is called ______.

A) multiyear analysis
B) horizon analysis
C) maturity analysis
D) reinvestment analysis

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

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Question 23

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Bonds issued in the U.S.are __________ and most bonds issued overseas are ___________.

If the quote for a Treasury bond is listed in the newspaper as 99:08 bid,99:11 ask,the actual price you can sell this bond given a $10,000 par value is _____________.

Under the pure expectations hypothesis and constant real interest rates for different maturities,an upward sloping yield curve would indicate __________________.

The yield to maturity on a bond is ________. I.above the coupon rate when the bond sells at a discount,and below the coupon rate when the bond sells at a premium II.the discount rate that will set the present value of the payments equal to the bond price III.equal to the true compound return on investment only if all interest payments received are reinvested at the yield to maturity

Yields on municipal bonds are generally lower than yields on similar corporate bonds because of differences in _________.

One,two and three year maturity,default-free,zero-coupon bonds have yields-to-maturity of 7%,8% and 9% respectively.What is the implied one-year forward rate,one year from today?

You would typically find all but which one of the following in a bond contract?

A bond was purchased at a premium and is now selling at a discount because of a change in market interest rates.If the bond pays a 4% annual coupon,what is the likely impact on the holding period return in an investor decides to sell now?

The bonds of Elbow Grease Dishwashing Company have received a rating of "C" by Moody's.The "C" rating indicates the bonds are _________.

Consider the expectations theory of the term structure of interest rates.If the yield curve is downward sloping,this indicates that investors expect short-term interest rates to __________ in the future.

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 real rate of return on the TIPS bond in the first year?

Consider the liquidity preference theory of the term structure of interest rates.On average,one would expect investors to require _________.

Serial bonds are associated with _________.

Bonds with coupon rates that fall when the general level of interest rates rise are called _____________.

If you are holding a premium bond you must expect a _______ each year until maturity.If you are holding a discount bond you must expect a _______ each year until maturity.

A corporate bond has a 10 year maturity and pays interest semiannually.The quoted coupon rate is 6% and the bond is priced at par.The bond is callable in 3 years at 110% of par.What is the bond's yield to call?

A coupon bond which pays interest of 4% annually,has a par value of $1,000,matures in 5 years,and is selling today at $785.The actual yield to maturity on this bond is _________.

Bonds rated _____ or better by Standard and Poor's are considered investment grade.