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Rate of return = [$1,037.19 + (.065 × $1,000) - $1,054.47]/$1,054.47 = .0453, or 4.53%
46. If a bond investor's rate of return for a particular period equaled the bond's coupon rate,
then during that period, the bond's price:
47. What is the relationship between a bondholder's rate of return and the bond's yield to
maturity if he does not hold the bond until it matures?
48. If the coupon rate on an outstanding bond is lower than the relevant current interest rate,
then the yield to maturity will be:
49. If a 4-year bond with a 7% coupon and a 10% yield to maturity is currently worth $904.90,
how much will it be worth 1 year from now if interest rates are constant?
50. What price will be paid for a U.S. Treasury bond with an ask price of 135.4062 if the face
value is $100,000?
51. You purchased a 6% annual coupon bond at par and sold it one year later for $1,015.16.
What was your rate of return on this investment if the face value at maturity was $1,000?
52. How does a bond dealer generate profits when trading bonds?
53. A bond is priced at $1,100, has 10 years remaining until maturity, and has a 10% coupon,
paid semiannually. What is the amount of the next interest payment?
54. The yield curve depicts the current relationship between:
55. When the yield curve is upward-sloping, then:
56. Nominal U.S. Treasury bond yields:
57. Which one of these is included in the yield of a bond with a low credit rating but not
included in a U.S. Treasury bond yield? Assume both bonds are selling at a premium.
58. The purpose of a floating-rate bond is to:
59. Which of the following would
not
be associated with a zero-coupon bond?
60. Which one of the following bonds would be likely to exhibit a greater degree of interest
rate risk?
61. A "convertible bond" provides the option to convert:
62. Rosita purchased a bond for $989 that had a 7% coupon and semiannual interest
payments. She sold the bond after 6 months and earned a total return of 4.8% on this investment.
At what price, did she sell the bond?
63. A U.S. Treasury security that pays a fixed coupon and has an initial maturity of 2 to 10
years is called a:
64. Which one of the following must be correct for a bond currently selling at a premium?
65. A bond has a coupon rate of 8%, pays interest semiannually, sells for $960, and matures
in 3 years. What is its yield to maturity?
66. Investors who buy which type of bond will be guaranteed a capital loss if they hold the
bond to maturity?
67. Investors who purchase bonds having lower credit ratings should expect:
68. By how much will a bond increase in price over the next year if it currently sells for
$925.16, has 5 years until maturity, and an annual coupon rate of 7%? (Do not round intermediate
calculations.)
69. If a bond is priced at par value, then:
70. The existence of an upward-sloping yield curve suggests that:
71. What is the amount of the annual coupon payment for a bond that has 6 years until
maturity, sells for $1,050, and has a yield to maturity of 9.37%?
72. This morning, you purchased a TIPS. Which one of these should you expect to occur if
you hold this bond during an inflationary period?
73. Many investors may be drawn to municipal bonds because of the bonds':
74. Two years ago bonds were issued at par with 10 years until maturity and a 7% annual
coupon. If interest rates for that grade of bond are currently 8.25%, what will be the market price
of these bonds?
75. If a bond offers a current yield of 5% and a yield to maturity of 5.45%, then the:
76. What is the total return to an investor who buys a bond for $1,100 when the bond has a
9% coupon and 5 years until maturity, then sells the bond after 1 year for $1,085?
77. How much would an investor lose the first year if she purchased a 30-year zero-coupon
bond with a $1,000 par value and a 10% yield to maturity, only to see market interest rates
increase to 12% one year later?
78. Assume a bond has been owned by four different investors during its 20-year history.
Which one of the following is
most
apt to have been different for each of these owners?
79. If an investor purchases a 3%, 5-year TIPS at its par value of $1,000 and the CPI
increases 3% over each of the next 5 years, what will be the real value of the principal at
maturity?
80. Which one of the following is correct concerning real interest rates?
81. An investor holds two bonds, one with 5 years until maturity and the other with 20 years
until maturity. Which of the following is more likely if interest rates suddenly increase by 2%?
