Multiple Questions Answers

1. The relationship between a bond's price and the yield to maturity:
A. changes at a constant level for each percentage change of yield to maturity.
B. is an inverse relationship.
C. is a linear relationship.
D. has no relationship.

2.The longer the time to maturity:
A. the greater the price increase from an increase in interest rates.
B. the less the price increase from an increase in interest rates.
C. the greater the price increase from a decrease in interest rates.
D. the less the price decrease from a decrease in interest rates.

3. What is the approximate yield to maturity for a seven-year bond that pays 11% interest on a $1000 face value annually if the bond sells for $952?
A. 10.5%
B. 10.6%
C. 11.9%
D. 12.0%

4. A higher interest rate (discount rate) would:
A. reduce the price of corporate bonds.
B. reduce the price of preferred stock.
C. reduce the price of common stock.
D. all of the above