Chapter 14 Bond Prices and Yields Answer Key
Multiple Choice Questions
1.
The current yield on a bond is equal to
2.
If a 7% coupon bond is trading for $975.00, it has a current yield of
3.
If a 7.25% coupon bond is trading for $982.00, it has a current yield of
4.
If a 6.75% coupon bond is trading for $1,016.00, it has a current yield of
5.
If a 7.75% coupon bond is trading for $1,019.00, it has a current yield of
6.
If a 6% coupon bond is trading for $950.00, it has a current yield of
7.
If an 8% coupon bond is trading for $1,025.00, it has a current yield of
8.
If a 7.5% coupon bond is trading for $1,050.00, it has a current yield of
9.
A coupon bond pays annual interest, has a par value of $1,000, matures in four years, has
a coupon rate of 10%, and has a yield to maturity of 12%. The current yield on this bond is
10.
A coupon bond pays annual interest, has a par value of $1,000, matures in four years, has
a coupon rate of 8.25%, and has a yield to maturity of 8.64%. The current yield on this
bond is
11.
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a
coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond is
12.
A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a
coupon rate of 8.7%, and has a yield to maturity of 7.9%. The current yield on this bond is
13.
Of the following four investments, ________ is considered the safest.
14.
Of the following four investments, ________ is considered the least risky.
15.
To earn a high rating from the bond rating agencies, a firm should have
16.
A firm with a low rating from the bond rating agencies would have
17.
At issue, coupon bonds typically sell
Topic: Bonds
18.
Topic: Bonds
Accrued interest
19.
The invoice price of a bond that a buyer would pay is equal to
20.
An 8% coupon U.S. Treasury note pays interest on May 30 and November 30 and is traded
for settlement on August 15. The accrued interest on the $100,000 face value of this note
is
Topic: Bonds
21.
A coupon bond is reported as having an ask price of 108% of the $1,000 par value in the
Wall
Street
Journal
. If the last interest payment was made one month ago and the coupon
rate is 9%, the invoice price of the bond will be
22.
A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the
Wall
Street
Journal.
If the last interest payment was made two months ago and the coupon
rate is 12%, the invoice price of the bond will be
23.
The bonds of Ford Motor Company have received a rating of “B” by Moody’s. The “B”
rating indicates
24.
The bond market
25.
Ceteris paribus, the price and yield on a bond are
26.
The ______ is a measure of the average rate of return an investor will earn if the investor
buys the bond now and holds until maturity.
27.
The _________ gives the number of shares for which each convertible bond can be
exchanged.
28.
A coupon bond is a bond that
29.
A ___________ bond is a bond where the bondholder has the right to cash in the bond
before maturity at a specified price after a specific date.
30.
Callable bonds
31.
A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a
yield of 6.2%. A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a
bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on
the bonds issued by Shell and Ford, respectively, are
32.
A Treasury bond due in one year has a yield of 4.6%; a Treasury bond due in five years has
a yield of 5.6%. A bond issued by Lucent Technologies due in five years has a yield of
8.9%; a bond issued by Exxon due in one year has a yield of 6.2%. The default risk
premiums on the bonds issued by Exxon and Lucent Technologies, respectively, are