Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
69. The yield to maturity of a 10-year zero-coupon bond with a par value of $1,000 and a
market price of $625 is _____.
70. Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and
coupon rate of 5%. Assume annual coupon payments.
What is the nominal rate of return on the TIPS bond in the first year?
71. Consider a newly issued TIPS bond with a 3-year maturity, par value of $1,000, and
coupon rate of 5%. Assume annual coupon payments.
What is the real rate of return on the TIPS bond in the first year?
72. On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA
corporate bonds.
Suppose market interest rates decline by 100 basis points (i.e., 1%). The effect of this decline
would be ______.
73. On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA
corporate bonds.
If interest rates are expected to rise, then Joe Hill should ____.
74. On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA
corporate bonds.
If the volatility of interest rates is expected to increase, then Joe Hill should __.
75. One-, two-, and three-year maturity, default-free, zero-coupon bonds have yields to
maturity of 7%, 8%, and 9%, respectively. What is the implied 1-year forward rate 1 year from
today?
76. If the quote for a Treasury bond is listed in the newspaper as 98:09 bid, 98:13 ask, the
actual price at which you can purchase this bond given a $10,000 par value is _____________.
77. If the price of a $10,000 par Treasury bond is $10,237.50, the quote would be listed in the
newspaper as ________.
78. A bond pays a semiannual coupon, and the last coupon was paid 61 days ago. If the
annual coupon payment is $75, what is the accrued interest? (Assume 182 days in the 6-month
period.)
79. A bond has a flat price of $985, and it pays an annual coupon. The last coupon payment
was made 90 days ago. What is the invoice price if the annual coupon is $69?
80. If the quote for a Treasury bond is listed in the newspaper as 99:08 bid, 99:11 ask, the
actual price at which you can sell this bond given a $10,000 par value is _____________.
81. A bond has a 5% coupon rate. The coupon is paid semiannually, and the last coupon was
paid 35 days ago. If the bond has a par value of $1,000, what is the accrued interest?
82. The price on a Treasury bond is 104:21, with a yield to maturity of 3.45%. The price on a
comparable maturity corporate bond is 103:11, with a yield to maturity of 4.59%. What is the
approximate percentage value of the credit risk of the corporate bond?
83. You buy a bond with a $1,000 par value today for a price of $875. The bond has 6 years to
maturity and makes annual coupon payments of $75 per year. You hold the bond to maturity, but
you do not reinvest any of your coupons. What was your effective EAR over the holding period?
84. You buy an 8-year $1,000 par value bond today that has a 6% yield and a 6% annual
payment coupon. In 1 year promised yields have risen to 7%. Your 1-year holding-period return
was ___.
85. You buy a 10-year $1,000 par value zero-coupon bond priced to yield 6%. You do not sell
the bond. If you are in a 28% tax bracket, you will owe taxes on this investment after the first year
equal to _______.
86. You buy a 10-year $1,000 par value 4% annual-payment coupon bond priced to yield 6%.
You do not sell the bond at year-end. If you are in a 15% tax bracket, at year-end you will owe
taxes on this investment equal to _______.
87. An investor pays $989.40 for a bond. The bond has an annual coupon rate of 4.8%. What is
the current yield on this bond?
88. If the coupon rate on a bond is 4.5% and the bond is selling at a premium, which of the
following is the most likely yield to maturity on the bond?
89. The price of a bond (with par value of $1,000) at the beginning of a period is $980 and at
the end of the period is $975. What is the holding-period return if the annual coupon rate is 4.5%?
90. A bond was purchased at a premium and is now selling at a discount because of a change
in market interest rates. If the bond pays a 4% annual coupon, what is the likely impact on the
holding-period return if an investor decides to sell now?
91. The ___________ is the document that defines the contract between the bond issuer and
the bondholder.
