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43) Which one of the following must be equal for two bonds if they are to have similar changes
in their prices given a relatively small change in bond yields?
A) coupon payment
B) time to maturity
C) market price
D) duration
E) current yield
44) All else constant, which of the following will decrease the Macaulay duration of a straight
bond?
I. reducing the coupon payment
II. shortening the time to maturity
III. lowering the yield to maturity
A) I only
B) II only
C) II and III only
D) I and II only
E) I and III only
45) Which one of the following statements is correct concerning Macaulay duration?
A) The duration of a zero coupon bond is equal to the time to maturity.
B) Most bonds have durations in excess of 15 years.
C) The duration of a coupon bond is a linear function between the time to maturity and the
duration.
D) The duration of a coupon bond is greater than that of a zero coupon bond given equal
maturity dates.
E) The percentage change in a bond's price is approximately equal to the change in the yield to
maturity multiplied by (-1 × Macaulay duration).
46) The modified duration:
A) is equal to the Macaulay duration divided by (1 + Yield to maturity).
B) multiplied by (-1 × Change in the yield to maturity) equals the approximate percentage
change in a bond's price.
C) will be the same for any bonds that have equal times to maturity.
D) only applies to pure discount securities.
E) must be converted to a Macaulay duration before computing the percentage change in a
bond's price.
47) To immunize your portfolio, you should:
A) avoid callable bonds.
B) match bond maturity dates to your target dates.
C) match bond durations to your target dates.
D) purchase only par value bonds.
E) purchase only high-coupon bonds.
48) Last year, you created an immunized portfolio with an average maturity date of 14.5 years, a
yield-to-maturity of 9.8 percent, and a duration of 9.6 years. According to the policy of dynamic
immunization, you should now modify your portfolio in which one of the following ways?
A) modify the yield-to-maturity to 9.1 percent
B) modify the portfolio so the average maturity remains at 14.5 years
C) modify the portfolio so the average maturity becomes 13.5 years
D) modify the portfolio so the duration remains at 9.6 years
E) modify the portfolio so the duration becomes 8.6 years
49) Dynamic immunization is primarily aimed at reducing which one of the following risks?
A) default
B) liquidity
C) reinvestment
D) inflation
E) taxation
50) A bond pays semiannual interest payments of $35.25. What is the coupon rate if the par
value is $1,000?
A) 5.75 percent
B) 6.50 percent
C) 7.05 percent
D) 8.50 percent
E) 9.38 percent
51) A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual
interest payment if you own 8 of these bonds?
A) $110
B) $220
C) $330
D) $440
E) $880
52) A bond has a par value of $1,000 and a coupon rate of 6.5 percent. What is the dollar amount
of each semiannual interest payment if you own 8 of these bonds?
A) $180
B) $260
C) $320
D) $420
E) $840
53) A bond has a par value of $1,000, a market price of $1,030, and a coupon rate of 6.0 percent.
What is the current yield?
A) 5.68 percent
B) 5.71 percent
C) 5.75 percent
D) 5.78 percent
E) 5.83 percent
54) A 5.5 percent coupon bond has a face value of $1,000 and a current yield of 5.64 percent.
What is the current market price?
A) $975.18
B) $989.18
C) $1,011.82
D) $3,933.43
E) $4,067.47
55) A bond has 8 years to maturity, a 7 percent coupon, a $1,000 face value, and pays interest
semiannually. What is the bond's current price if the yield to maturity is 6.91 percent?
A) $799.32
B) $848.16
C) $917.92
D) $1,005.46
E) $1,009.73
56) The Country Inn has bonds outstanding with a par value of $1,000 each and a 5.25 percent
coupon. The bonds mature in 8.5 years and pay interest semiannually. What is the current value
of each of these bonds if the yield to maturity is 6.0 percent?
A) $938.40
B) $950.63
C) $988.55
D) $1,004.36
E) $1,009.47
57) Last year, BT Motors issued 10-year bonds with a 9 percent coupon and semi-annual interest
payments. What is the market price of a $1,000 bond if the yield to maturity is 8.9 percent?
A) $1,003.97
B) $1,006.53
C) $1,042.89
D) $1,414.14
E) $1,585.36
58) A $1,000 face value bond matures in 11 years, pays interest semiannually, and has a 6.5
percent coupon. The bond currently sells for $1,025. What is the yield to maturity?
A) 6.17 percent
B) 6.18 percent
C) 6.28 percent
D) 6.34 percent
E) 6.37 percent
59) A $1,000 par value 4.75 percent Treasury bond pays interest semiannually and matures in
10.5 years. What is the yield to maturity if the bond is currently quoted at a price of 110.5?
A) 1.54 percent
B) 1.68 percent
C) 1.77 percent
D) 3.28 percent
E) 3.54 percent
60) A $1,000 semiannual coupon bond matures in 15 years, has a coupon rate of 7.5 percent, and
a market price of $982. What is the yield to maturity?
A) 3.86 percent
B) 4.01 percent
C) 4.08 percent
D) 7.53 percent
E) 7.70 percent
61) An 8.5 percent coupon bond pays interest semiannually and has 10.5 years to maturity. The
bond has a face value of $1,000 and a market value of $878.50. What is the yield to maturity?
A) 5.16 percent
B) 8.37 percent
C) 8.78 percent
D) 10.43 percent
E) 11.21 percent
62) A $1,000 par value bond is currently valued at $1,055. The bond pays interest semi-annually,
has 10 years to maturity, and has a yield to maturity of 7.3 percent. The coupon rate is ________
percent and the current yield is ________ percent.
A) 7.80; 6.21
B) 8.00; 7.31
C) 8.00; 7.51
D) 8.08; 7.66
E) 8.50; 8.30
63) A $1,000 face value bond is selling for $1,016.36. The bond pays interest semiannually and
has 3.5 years to maturity. The yield to maturity is 5.48 percent. The current yield is ________
percent and the coupon rate is ________ percent.
A) 5.86; 5.90
B) 5.90; 6.00
C) 5.90; 5.86
D) 6.00; 5.90
E) 6.00; 5.86
64) The outstanding bonds of International Plastics mature in 6 years and pay semiannual interest
payments of $33.50 on a $1,000 face value bond. The bonds are currently selling for $1,008.64.
The coupon rate is ________ percent, the current yield is ________ percent, and the yield to
maturity is ________ percent.
A) 6.70; 6.64; 6.52
B) 6.70; 6.78; 6.57
C) 6.64; 6.83; 6.57
D) 6.55; 6.86; 6.60
E) 6.55; 6.91; 6.75
65) A bond has a $1,000 par value, semiannual interest payments of $45, and a current market
value of $1,045. The bonds mature in 11.5 years. The coupon rate is ________ percent, the
current yield is ________ percent, and the yield to maturity is ________ percent.
A) 9.00; 8.61; 8.38
B) 9.00; 8.72; 8.64
C) 9.00; 8.59; 8.33
D) 9.50; 8.87; 8.73
E) 9.50; 9.12; 9.19
66) Alaskan Motors has outstanding bonds that mature in 13 years and pay $34.50 every 6
months in interest. The par value is $1,000 per bond and the market value is $990. The coupon
rate is ________ percent, the current yield is ________ percent, and the yield to maturity is
________ percent.
A) 6.90; 6.57; 6.67
B) 6.90; 6.73; 6.71
C) 6.90; 6.97; 7.02
D) 7.00; 7.37; 7.07
E) 7.00; 7.67; 7.21
67) You are considering two bonds. Both have semi-annual, 8 percent coupons, $1,000 face
values, and yields to maturity of 7.5 percent. Bond S matures in 4 years and Bond L matures in 8
years. What is the difference in the current prices of these bonds?
A) $10.51
B) $11.33
C) $11.52
D) $12.67
E) $12.88
68) Two bonds have a coupon rate of 5.25 percent, semi-annual payments, face values of $1,000,
and yields to maturity of 6.1 percent. Bond S matures in 5 years and bond L matures in 10 years.
What is the difference in the current prices of these bonds?
A) $25.26
B) $26.78
C) $27.40
D) $28.38
E) $29.02
69) You want to buy a bond that has a quoted price of $923. The bond pays interest semiannually
on April 1 and October 1. The coupon rate is 6 percent. What is the clean price of this bond if
today's date is June 1? Assume a 360-day year.
A) $927.62
B) $923.00
C) $923.23
D) $936.85
E) $1,076.83
70) You are buying a bond at a quoted price of $892. The bond has a 7.5 percent coupon and
pays interest semiannually on February 1 and August 1. What is the dirty price of this bond if
today is April 1? Assume a 360-day year.
A) $896.17
B) $904.50
C) $913.67
D) $938.50
E) $942.00
71) Allen Roofing Materials has 6.5 percent bonds outstanding that are currently priced at $1,044
each. The bonds pay interest on December 1 and June 1. What is the dirty price of this bond if
today's date is April 1? Assume a 360-day year.
A) $1,039.25
B) $1,051.75
C) $1,065.67
D) $1,110.25
E) $1,124.50
72) You own a bond that pays semiannual interest payments of $38. The bond is callable in 2
years at a premium of $76. What is the callable bond price if the yield to call is 7.9 percent?
A) $995.46
B) $1,016.86
C) $1,059.64
D) $1,124.87
E) $1,220.87
