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1 | |
A bond's coupon rate is equal to: |
| | A) | a percentage of its par value |
| | B) | its maturity value |
| | C) | a percentage of its price |
| | D) | its yield to maturity |
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2 | |
Periodic receipts of interest by the bondholder are known as: |
| | A) | a zero-coupon. |
| | B) | The coupon rate. |
| | C) | The default premium. |
| | D) | Coupon payments. |
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3 | |
You buy a $1000 par value bond that was quoted at 92.5, so you: |
| | A) | pay $1075 for the bond |
| | B) | pay 92.5% of face value for the bond |
| | C) | receive $925 upon the maturity date of the bond |
| | D) | receive 92.5% of the stated value of the coupon payments |
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4 | |
How much does the $1,000 to be received upon a bond's maturity in four years add to the bond's price if the appropriate discount rate is 6%? |
| | A) | $792.09 |
| | B) | $760.00 |
| | C) | $260.00 |
| | D) | $209.91 |
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5 | |
If an investor purchases a bond when its current yield is less than the coupon rate, then the bond's price will be expected to: |
| | A) | be less than the face value at maturity. |
| | B) | Exceed the face value at maturity. |
| | C) | Decline over time, reaching par value at maturity. |
| | D) | Increase over time, reaching par value at maturity. |
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6 | |
For a bond with a 6% coupon, four years until maturity and a price of $750, what is the current yield? |
| | A) | 12.0% |
| | B) | 10.0% |
| | C) | 8.0% |
| | D) | 6.5% |
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7 | |
A bond's yield to maturity takes into consideration: |
| | A) | neither current yield nor price changes of a bond. |
| | B) | Current yield but not price changes of a bond. |
| | C) | Price changes but not current yield of a bond. |
| | D) | Both current yield and price changes of a bond. |
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8 | |
For a bond with three years to maturity, a price of $1053.46 and a yield to maturity of 6%, what is the coupon rate? |
| | A) | 6% |
| | B) | 7% |
| | C) | 8% |
| | D) | 9% |
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9 | |
Which of the following does not change during the life of a bond? |
| | A) | coupon rate |
| | B) | yield to maturity |
| | C) | current yield |
| | D) | current price |
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10 | |
If the coupon rate is lower than current interest rates, then the yield to maturity will be: |
| | A) | higher than the coupon rate. |
| | B) | Lower than the coupon rate. |
| | C) | Equal to the coupon rate. |
| | D) | Lower than current interest rates. |
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11 | |
How does a bond dealer generate profits when trading bonds? |
| | A) | By maintaining bid prices higher than the asking price |
| | B) | By lowering the bond's coupon rate |
| | C) | By maintaining bid prices lower than the asking price |
| | D) | By retaining the bond's next coupon payment |
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12 | |
Canada bond yields do not contain a: |
| | A) | coupon interest payment. |
| | B) | Default premium. |
| | C) | Yield to maturity. |
| | D) | Nominal interest rate. |
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13 | |
When riskier corporations issue bonds that include a default premium, the promised yield will sometimes be: |
| | A) | less than the actual yield. |
| | B) | Less than the yield on a default-free bond. |
| | C) | Greater than the actual yield. |
| | D) | Greater than the face value of the bond. |
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14 | |
How much should you pay for a $1,000 bond with 10% coupon, annual payments, and five years to maturity if the interest rate is 12%? |
| | A) | $ 927.90 |
| | B) | $ 981.40 |
| | C) | $1,000.00 |
| | D) | $1,075.82 |
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15 | |
What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19? |
| | A) | 5.00% |
| | B) | 5.33% |
| | C) | 6.46% |
| | D) | 7.00% |
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