Finance Multiple Choice and Short Problems

Question 1
1. A discount bond has a yield to maturity that:
 
 exceeds the coupon rate.
 
 equals zero.
 
 is equal to the current yield.
 
 is less than the coupon rate.
 
 equals the bond's coupon rate.
1 points
Question 2
1. The rate required in the market on a bond is called the:
 
 call yield
 
 current yield
 
 yield to maturity
 
 risk premium
 
 liquidity premium
1 points
Question 3
1. ABC has issued a bond with the following characteristics:
     Par: $1,000; Time to maturity: 17 years; Coupon rate: 4%;
     Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 8.33%
     Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
 
1 points
Question 4
1. A bond which sells for less than the face value is called a:
 
 perpetuity.
 
 par value bond.
 
 debenture.
 
 premium bond.
 
 discount bond.
1 points
Question 5
1. You paid $908 for a corporate bond that has a 11.77% coupon rate. What is the current yield?
Hint: if nothing is mentioned, then assume par value = $1,000
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points

Question 6
1. Assume that you wish to purchase a 13-year bond that has a maturity value of $1,000 and a coupon interest rate of 4%, paid semiannually. If you require a 8.91% rate of return on this investment (YTM), what is the maximum price that you should be willing to pay for this bond? That is, solve for PV.
    Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
 
1 points
Question 7
1. ABC wants to issue 8-year, zero coupon bonds that yield 6.65 percent. What price should they charge for these bonds if they have a par value of $1,000? That is, solve for PV. Assume annual compounding.
Hint: zero coupon bonds means PMT = 0
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
 
1 points
Question 8
1. ABC has issued a bond with the following characteristics:
Par: $1,000; Time to maturity: 15 years; Coupon rate: 4%;
Assume annual coupon payments. Calculate the price of this bond if the YTM is 9.5%
Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
 
1 points
Question 9
1. ABC's bonds have a 9.5 percent coupon and pay interest semi-annually. Currently, the bonds are quoted at 106.315 percent of par value. The bonds mature in 8 years. What is the yield to maturity?
 
1 points
Question 10
1. The 8 percent coupon bonds of the Peterson Co. are selling for 98 percent of par value. The bonds mature in 5 years and pay interest semi-annually. These bonds have a yield to maturity of _____ percent.
 
1 points
Question 11
1. ABC's Inc.'s bonds currently sell for $1,280 and have a par value of $1,000. They pay a $135 annual coupon and have a 15-year maturity, but they can be called in 5 years at $1,050. What is their yield to call (YTC)?
Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
Question 12
1. The 10.57 percent coupon bonds of the Peterson Co. are selling for $884.85. The bonds mature in 5 years and pay interest semi-annually. These bonds have current yield of _____ percent.
     Enter your answer in percentages rounded off to two decimal points.
 
1 points
Question 13
1. The 11.34 percent, $1,000 face value bonds of Tim McKnight, Inc., are currently selling at $986.98. What is the current yield?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
Question 14
1. A premium bond is a bond that:
 
 is callable within 12 months or less.
 
 has a market price which exceeds the face value.
 
 is selling for less than par value.
 
 has a face value in excess of $1,000.
 
 has a par value which exceeds the face value.
1 points
Question 15
1. ABC Inc., has $1,000 face value bonds outstanding. These bonds mature in 3 years, and have a 6.5 percent coupon. The current price is quoted at 98.59 percent of par value. Assume semi-annual payments. What is the yield to maturity?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
Question 16
1. A firm's bonds have maturity of 10 years with a $1000 face value, an 8% semi-annual coupon, are callable in 5 years, at $1,050, and currently sells at a price of $1,100. What is the yield to call (YTC)?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points

Question 17
1. The principal amount of a bond that is repaid at the end of term is called the par value or the:
 
 back-end amount
 
 coupon
 
 face value
 
 discount amount
 
 coupon rate
1 points
Question 18
1. Stealers Wheel Software has 5.94% coupon bonds on the market with nine years to maturity. The bonds make semi-annual payments and currently sell for 90% of par. What is the current yield?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
Question 19
1. BCD’s $1,000 par value bonds currently sell for $798.40. The coupon rate is 10%, paid semi-annually. If the bonds have 5 years to maturity, what is the yield to maturity?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
Question 20
1. The yield to maturity on a Marshall Co. premium bond is 7.6 percent. This is the:
 
 nominal rate.
 
 effective rate.
 
 real rate.
 
 current yield.
 
 coupon rate.
1 points
Question 21
1. ABC has issued a bond with the following characteristics:
     Par: $1,000; Time to maturity: 19 years; Coupon rate: 5%;
    Assume semi-annual coupon payments. Calculate the price of this bond if the YTM is 5.16%
    Note: Enter your answer rounded off to two decimal points. Do not enter $ or comma in the answer box. For example, if your answer is $12.345 then enter as 12.35 in the answer box.
 
1 points

Question 22
1. ABC Corp. issued 15-year bonds 2 years ago at a coupon rate of 10.6%. The bonds make semi-annual payments. If these bonds currently sell for 97% of par value, what is the YTM?
     Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.12345 then enter as 12.35 in the answer box.
 
1 points
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