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43. A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years,
and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today
will be _________.
44. A coupon bond that pays semiannual interest is reported in the
Wall Street Journal
as
having an ask price of 117% of its $1,000 par value. If the last interest payment was made 2
months ago and the coupon rate is 6%, the invoice price of the bond will be _________.
45. A Treasury bond due in 1 year has a yield of 6.3%, while a Treasury bond due in 5 years
has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corp. has a yield of
9.6%, while a bond due in 1 year issued by High Country Marketing Corp. has a yield of 6.8%. The
default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp.
are, respectively, __________ and _________.
46. 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.
47. Yields on municipal bonds are typically ___________ yields on corporate bonds of similar
risk and time to maturity.
48. You purchased a 5-year annual-interest coupon bond 1 year ago. Its coupon interest rate
was 6%, and its par value was $1,000. At the time you purchased the bond, the yield to maturity
was 4%. If you sold the bond after receiving the first interest payment and the bond's yield to
maturity had changed to 3%, your annual total rate of return on holding the bond for that year
would have been approximately _________.
49. 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 ______.
50. $1,000 par value zero-coupon bonds (ignore liquidity premiums)
The expected 1-year interest rate 1 year from now should be about _________.
51. $1,000 par value zero-coupon bonds (ignore liquidity premiums)
One year from now bond C should sell for ________ (to the nearest dollar).
52. $1,000 par value zero-coupon bonds (ignore liquidity premiums)
The expected 2-year interest rate 3 years from now should be _________.
53. The __________ of a bond is computed as the ratio of the annual coupon payment to the
market price.
54. A bond has a par value of $1,000, a time to maturity of 10 years, and a coupon rate of 8%
with interest paid annually. If the current market price is $750, what is the capital gain yield of this
bond over the next year?
55. Consider the following $1,000 par value zero-coupon bonds:
The expected 1-year interest rate 2 years from now should be _________.
56. Which of the following bonds would most likely sell at the lowest yield?
57. A 1% decline in yield will have the least effect on the price of a bond with a _________.
58. Consider the following $1,000 par value zero-coupon bonds:
The expected 1-year interest rate 3 years from now should be _________.
59. Consider the following $1,000 par value zero-coupon bonds:
The expected 1-year interest rate 4 years from now should be _________.
60. You can be sure that a bond will sell at a premium to par when _________.
61. 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?
62. Consider a 7-year bond with a 9% coupon and a yield to maturity of 12%. If interest rates
remain constant, 1 year from now the price of this bond will be _________.
63. Under the pure expectations hypothesis and constant real interest rates for different
maturities, an upward-sloping yield curve would indicate __________________.
64. 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
65. Yields on municipal bonds are generally lower than yields on similar corporate bonds
because of differences in _________.
66. Assuming semiannual compounding, a 20-year zero coupon bond with a par value of
$1,000 and a required return of 12% would be priced at _________.
67. A discount bond that pays interest semiannually will:
I. Have a lower price than an equivalent annual payment bond
II. Have a higher EAR than an equivalent annual payment bond
III. Sell for less than its conversion value
68. A 6% coupon U.S. Treasury note pays interest on May 31 and November 30 and is traded
for settlement on August 10. The accrued interest on the $100,000 face amount of this note is
_________.
