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| 1 | |
Consider a bond with the following characteristics: Face value: | $1,000 | Coupon rate: | 8% | Payment structure: | Semiannual | Maturity: | 5 years |
If the annual required rate of return is 6%, what is the bond's fair present value? (nearest dollar) |
| | A) | $1,045 |
| | B) | $1,085 |
| | C) | $1,427 |
| | D) | $ 919 |
| | E) | $ 955 |
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| 2 | |
Bonds of ABC Corp. are currently priced at $932. The bonds have a face value of $1,000. Coupon payments occur twice per year. The bonds have 12 years left until maturity. These bonds are: |
| | A) | premium bonds |
| | B) | money market securities |
| | C) | par bonds |
| | D) | discount bonds |
| | E) | (b) and (c) |
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| 3 | |
Consider a bond having: Face value | $1,000 | Maturity | 7 years | Coupon rate | 8.0% | Payment structure | Annual (just one payment at the end of each year) |
If the "required rate of return" is 10%, what is the bond's fair present value? (Nearest dollar) |
| | A) | $ 903 |
| | B) | $1,104 |
| | C) | $1,054 |
| | D) | $1,162 |
| | E) | $ 854 |
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| 4 | |
Today, Maureen purchased a coupon bond for $1,020. It has a face value of $1,000 an 8% coupon rate (with coupons paid just once per year), and a maturity of 4 years. Maureen plans to hold the bond for just one year, and then sell it—and she expects to sell at a price of $1,060. What is Maureen's expected rate of return? (Nearest hundredth of a percent) |
| | A) | 3.92% |
| | B) | 7.80% |
| | C) | 8.00% |
| | D) | 14.00% |
| | E) | 11.76% |
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| 5 | |
A coupon-paying bond has a current price of $945. Its face value is $1,000. Its $70 coupon is paid just once per year (at the end of each year). There are 2 years left until maturity. What is the bond's yield to maturity? (Nearest tenth of a percent) |
| | A) | 4.6% |
| | B) | 2.9% |
| | C) | 7.0% |
| | D) | 10.2% |
| | E) | 13.6% |
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| 6 | |
A bond has three years to maturity. Its coupon rate is 6%--and it pays just once per year. Its face value is $1,000. At its yield to maturity of 5%, it is priced at $1,041. Compute the duration of this bond. |
| | A) | 1.9 |
| | B) | 3.7 |
| | C) | 3.0 |
| | D) | 2.8 |
| | E) | 2.9 |
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| 7 | |
Suppose we observe a bond currently priced at $1,066. Its face value is $1,000. We would refer to this as a: |
| | A) | Par bond |
| | B) | Premium bond |
| | C) | Junk bond |
| | D) | Discount bond |
| | E) | Deluxe bond |
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| 8 | |
A "zero coupon" bond: |
| | A) | has zero sensitivity to interest rate changes |
| | B) | always sells at a premium |
| | C) | has no face value |
| | D) | can never sell at a premium |
| | E) | is a bond issued by a "discount" retailer, such as Wal-Mart. |
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| 9 | |
Jackie owns a portfolio of Green & Gold Bonds. The bonds make their coupon payments just once per year. Right now, Jackie's bonds are worth a total of $28,500. The duration of the bonds is 6.0. Their yield to maturity is 9%. If the yield to maturity falls by 1 percentage point, the bonds' value will: |
| | A) | rise by about $1,569. |
| | B) | rise by about $2,420. |
| | C) | fall by about $261. |
| | D) | fall by about $1,569. |
| | E) | fall by about $2,420. |
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| 10 | |
Stan intends to buy bonds, but he wants bonds that will show little price change as market interest rates change. Stan will most likely want: |
| | A) | Bonds having low duration |
| | B) | Zero coupon bonds |
| | C) | Premium bonds |
| | D) | Bonds with long maturities |
| | E) | Bonds with lower coupon rates |
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| 11 | |
The relationship between bond price and yield to maturity is not linear (i.e., not a "straight-line"). The technical term for this is: |
| | A) | Duration |
| | B) | Modified duration |
| | C) | Convexity |
| | D) | Sensitivity |
| | E) | Required return |
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| 12 | |
For semiannually paying bonds: suppose we divide the Macaulay duration by one plus one-half of the bond's yield to maturity. The result is called: |
| | A) | Required rate of return |
| | B) | Convexity |
| | C) | Price sensitivity |
| | D) | Modified duration |
| | E) | Par value |
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| 13 | |
The interest rate used to find the "fair present value" of a security is called the: |
| | A) | coupon interest rate |
| | B) | required rate of return |
| | C) | realized rate of return |
| | D) | effective annual rate |
| | E) | expected rate of return |
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| 14 | |
Consider a bond that pays coupons semiannually. The face value is $1,000. The current bond price is $1,087. The coupon interest rate is 9%. The bond has 5 years left until maturity. What is this bond's yield to maturity? (Nearest hundredth of a percent) |
| | A) | 3.46% |
| | B) | 8.98% |
| | C) | 6.91% |
| | D) | 1.74% |
| | E) | 10.37% |
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| 15 | |
Consider a bond with: $1,000 face value; yield to maturity of 8.0%; coupon interest rate of 9.0% with annual, end-of-year payments; maturity of 2 years. What is this bond's duration? (Nearest hundredth) |
| | A) | 1.46 |
| | B) | 1.00 |
| | C) | 1.92 |
| | D) | 2.00 |
| | E) | 2.13 |
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| 16 | |
Mary bought a coupon-paying bond at a price of $1,025. The bond pays one coupon per year, at the end of year. One year after Mary's purchase, she received a coupon of $80; she also sold the bond for $1,010. What was Mary's realized rate of return? (Nearest tenth of a percent) |
| | A) | 7.8% |
| | B) | 6.3% |
| | C) | 8.0% |
| | D) | 1.5% |
| | E) | 9.3% |
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| 17 | |
Consider a zero-coupon bond with face value of $1,000 and 5 years to maturity. The bond's yield to maturity is 9%. What is its duration? |
| | A) | 9.00 |
| | B) | 1.09 |
| | C) | 1.90 |
| | D) | 5.00 |
| | E) | 1.00 |
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