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Multiple Choice Quiz
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1

What is the market value of a 20-year, 10 percent coupon bond that pays semi-annual payments? Assume the bond has a $1,000 face value and an 8 percent yield to maturity.
A)$634.86
B)$642.26
C)$1,135.90
D)$1,197.93
E)$1,215.62
2

Jebco, Inc., just issued a bond with a $1,000 face value and a coupon rate of 6 percent. The bond has a life of 25 years, pays annual coupons, and the yield to maturity is 7.2 percent. What is the current market price?
A)$861.77
B)$862.64
C)$929.08
D)$1,153.40
E)$1,154.38
3

PJ Manufacturing just issued a bond with a $1,000 face value and a coupon rate of 6 percent. The bond has a life of 20 years, pays semi-annual coupons, and the yield to maturity is 6.8 percent. What percent of the bond's price represents the present value of the bond's face amount?
A)24.6 percent
B)28.7 percent
C)31.8 percent
D)36.2 percent
E)38.1 percent
4

J.J.'s Drive-Thru Auto Wash just issued a bond with a $1,000 face value and a coupon rate of 8.5 percent. The bond has a life of 30 years, pays semi-annual coupons, and the yield to maturity is 7.4 percent. What percent of the bond's price represents the present value of the coupons?
A)75 percent
B)80 percent
C)85 percent
D)90 percent
E)100 percent
5

Nelda's Quilt Shop has $1,000 face value bonds outstanding with 13 years to maturity. The bonds pay interest semi-annually, have a coupon rate of 9 percent, and a market price of $888.47. What is the yield to maturity?
A)8.55 percent
B)9.81 percent
C)9.97 percent
D)10.2 percent
E)10.6 percent
6

Which one of the following statements is correct?
A)When the coupon rate exceeds the yield to maturity, a bond sells at a discount.
B)A premium bond has a current yield that is greater than the bond's yield to maturity.
C)A 6 percent, 10-year semi-annual bond is equal in value to a 6 percent, 10-year annual bond.
D)The value of a bond will increase if the coupon rate decreases.
E)Bond prices remain constant when market interest rates rise.
7

Which one of the following bonds is the most interest rate sensitive?
A)5-year, 5 percent coupon
B)5-year, 7 percent coupon
C)5-year, 9 percent coupon
D)10-year, 5 percent coupon
E)10-year, 9 percent coupon
8

What is the price of a bond that pays a semi-annual coupon of $32.50, has a face value of $1,000, matures in 11 years, and has a yield to maturity of 5.8 percent?
A)$687.53
B)$796.81
C)$813.01
D)$987.60
E)$1,056.34
9

All else equal, if market interest rates fall:

I. bond prices will rise.
II. prices on long-term bonds will change less, on a percentage basis, than prices on short-term bonds.
III. prices on low coupon bonds will change more, on a percentage basis, than prices on high coupon bonds.
IV. the coupon payment on a level coupon bond will decline.

A)I and III only
B)I and IV only
C)II and III only
D)I, III, and IV only
E)I, II, III, and IV
10

The Sanchez Firm has two bonds outstanding. Bond A has a 5 percent coupon and matures in 6 years. Bond B has a 7 percent coupon and matures in 12 years. Both bonds have a face value of $1,000 and pay interest semi-annually. The yield to maturity on both bonds is 6.25 percent. Given this, which one of the following statements is correct?
A)Based solely on time to maturity, Bond A is more interest rate sensitive than Bond B.
B)Bond A sells at a premium.
C)Bond B sells at par.
D)Based solely on the coupon rate, Bond A is less interest rate sensitive than Bond B.
E)Bond B pays $10 more every six months in interest than does Bond A.





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