Finance Chapter 6 2 Which The Following Would Not Associated

Topic: Bond types

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.

Which type of bond is certain to provide a capital loss if held to maturity?

67.

Investors who purchase bonds having lower credit ratings should expect:

68.

A bond has a face value of $1,000, has 5 years until maturity, and an annual coupon rate of 7%? It yields 5% currently. By

how much will the price change over the next year if the yield remains constant?

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% annual 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

likely 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%?

82.

How much should you be prepared to pay for a 10-year bond with an annual coupon of 6% and a yield to maturity of 7.5%?

83.

How much should you be prepared to pay for a 10-year bond with a 6% coupon, semiannual payments, and a semiannually

compounded yield of 7.5%?

84.

The market price of a bond with 12 years until maturity and an annual coupon rate of 8% increased yesterday. Which one of

these may have caused this price increase?

85.

An investor buys a 5-year, 9% coupon bond for $975, holds it for 1 year, and then sells the bond for $985. What was the

investor’s rate of return?

86.

An investor buys a 10-year, 7% coupon bond for $1,050, holds it for 1 year, and then sells it for $1,040. What was the

investor’s rate of return?

87.

An investor purchased a fixed-coupon bond at a time when the bond’s yield to maturity was 6.9%. The investor sold the bond

prior to maturity and realized a total return of 7.1%. Which of these most likely occurred while the investor owned the

bond?

88.

A bond has an ask quote of 99.5625 and a bid quote of 99.5475. How much will the bond dealer make on the purchase and

resale of a $100,000 bond?

89.

What are the conditions imposed on a debt issuer that are designed to protect bondholders ?

90.

The holder of which one of these securities has first claim on the assets of a firm?

91.

When market interest rates exceed a bond’s coupon rate, the bond will:

92.

Which one of the following is most likely for a CCC-rated bond, compared to a BBB-rated bond?

93.

Which of these bond ratings is the lowest of Moody’s investment-grade ratings?

94.

If a bond offers an investor 11% in nominal return during a year in which the rate of inflation is 4%, then the investor’s real

return is:

95.

What nominal return would an investor need to receive if he desires a real return of 4% and the rate of inflation is 5%?

96.

If you purchase a 5-year, zero-coupon bond for $691.72, how much could it be sold for 3 years later if interest rates have

remained stable?

97.

An investor buys a 10-year annual coupon bond at a yield of 8.7% and sells it 2 years later when it still yields 8.7%. What is

his rate of return over this period?

98.

What causes bonds to sell for a premium?

99.

The current yield tends to overstate a bond‘s total return when the bond sells for a premium because:

100.

The current yield tends to understate a bond’s total return when the bond sells for a discount because:

101.

When comparing a highly liquid bond with a comparable but less liquid bond, the highly liquid bond is most apt to have:

102.

Which one of these statements is not correct?

Chapter 06 Test Bank – Static Summary