86.
An 8 percent coupon municipal bond has 15 years left to maturity and has a price quote of
98.5. The bond can be called in six years. The call premium is one year of coupon
payments. Compute the bond’s yield to call and determine if the bond will be called.
Assume interest payments are paid semi-annually and a par value of $5,000.
87.
An 8% coupon municipal bond has 15 years left to maturity and has a price quote of 102.0.
The bond can be called in 6 years. The call premium is one year of coupon payments.
Compute the bond’s yield to call and determine if the bond will be called. Assume interest
payments are paid semi-annually and a par value of $5,000.
88.
A corporate bond with a 5 percent coupon has 10 years left to maturity. It has had a credit
rating of BBB and a yield to maturity of 8.0 percent. The firm has recently gotten into some
trouble and the rating agency is downgrading the bonds to BB. The new appropriate
discount rate will be 9 percent. What will be the change in the bond’s price in dollars?
Assume interest payments are paid semi-annually and par value is $1,000.
89.
A corporate bond with an 8.5 percent coupon has 10 years left to maturity. It has had a
credit rating of A and a yield to maturity of 10 percent. The firm has recently gotten into
some trouble and the rating agency is downgrading the bonds to BBB. The new
appropriate discount rate will be 11.5 percent. What will be the change in the bond’s price
in dollars? Assume interest payments are paid semi-annually and par value is $1,000.
90.
Junk bonds are those bonds with a credit rating of:
91.
Which of following are backed only by the reputation and financial stability of the
corporation?
92.
Investment grade bonds include those bonds with ratings:
93.
Which of the following statements is correct?
94.
Which of the following statements is correct?
95.
Sally is choosing between two bonds both of which mature in 15 years and have the same
level of risk. Bond A is a municipal bond that yields 5.25 percent. Bond B is a corporate
bond that yields 7.75 percent. If Sally is in the 30 percent tax bracket, which bond should
she select and why?
96.
Sally is choosing between two bonds both of which mature in 15 years and have the same
level of risk. Bond A is a municipal bond that yields 5.75 percent. Bond B is a corporate
bond that yields 7.75 percent. If Sally is in the 28 percent tax bracket, which bond should
she select and why?
97.
Sally is choosing between two bonds both of which mature in 15 years and have the same
level of risk. Bond A is a municipal bond that yields 7.20 percent. Bond B is a corporate
bond that yields 10.00 percent. If Sally is in the 28 percent tax bracket, which bond should
she select and why?
98.
A bond with 14 years to maturity is selling for $1,070 and has a yield to maturity of 10.06
percent. If this bond pays its coupon payments semi-annually and par value is $1,000,
what is the bond’s annual coupon rate?
99.
A bond with 23 years to maturity is selling for $991 and has a yield to maturity of 8.12
percent. If this bond pays its coupon payments semi-annually and par value is $1,000,
what is the bond’s annual coupon rate?
100.
All of the following items would need to be included in the bond’s indenture agreement
EXCEPT:
101.
Which of the following is not a correct statement?
102.
Which of the following would NOT be an example of an agency bond?
103.
Which of the following statements is correct?
104.
Which of the following statements is correct?
105.
Which of the following bonds will have the largest percentage increase in value if interest
rates decrease by 1 percent?
106.
Rank the following bonds, from highest to lowest interest rate risk: 2-year zero coupon, 2-
year 5 percent coupon bond, 30-year 5 percent coupon bond, 30-year, zero coupon bond.
107.
Which of the following statements is correct?
108.
Under which conditions will an investor demand a larger return (yield) on a bond?
109.
Which of the following statements is correct?
110.
If a bond is selling at a premium, then:
111.
The bond’s annual coupon rate divided by its market price is referred to as the:
112.
Possible shapes for the yield include all of the following EXCEPT:
113.
Possible shapes for the yield curve include all of the following EXCEPT: