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1、Multiple Choice Questions1. The current yield on a bond is equal to _. A) annual interest divided by the current market price B) the yield to maturity C) annual interest divided by the par value D) the internal rate of return E) none of the above Answer: A Difficulty: Easy Rationale: A is current yi
2、eld and is quoted as such in the financial press. 2. If a 7% coupon bond is trading for $975.00, it has a current yield of _ percent. A) 7.00 B) 6.53 C) 7.24 D) 8.53 E) 7.18 Answer: E Difficulty: Easy Rationale: 70/975 = 7.18. 3. If a 6% coupon bond is trading for $950.00, it has a current yield of
3、_ percent. A) 6.5 B) 6.3 C) 6.1 D) 6.0 E) 6.6 Answer: B Difficulty: Easy Rationale: 60/950 = 6.3. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 1 页，共 39 页 - - - - - - - - - - 4. If an 8% coupon bond is trading for $1025.00, it has a current yield of _ percent. A) 7.8 B) 8.7 C)
4、 7.6 D) 7.9 E) 8.1 Answer: A Difficulty: Easy Rationale: 80/1025 = 7.8. 5. If a 7.5% coupon bond is trading for $1050.00, it has a current yield of _ percent. A) 7.0 B) 7.4 C) 7.1 D) 6.9 E) 6.7 Answer: C Difficulty: Easy Rationale: 75/1050 = 7.1. 6. A coupon bond pays annual interest, has a par valu
5、e of $1,000, matures in 4 years, has a coupon rate of 10%, and has a yield to maturity of 12%. The current yield on this bond is _. A) 10.65% B) 10.45% C) 10.95% D) 10.52% E) none of the above Answer: A Difficulty: Moderate Rationale: FV = 1000, n = 4, PMT = 100, i = 12, PV= 939.25; $100 / $939.25 =
6、 10.65%. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 2 页，共 39 页 - - - - - - - - - - 7. A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond is _. A) 10
7、.39% B) 10.43% C) 10.58% D) 10.66% E) none of the above Answer: D Difficulty: Moderate Rationale: FV = 1000, n = 12, PMT = 110, i = 12, PV= 938.06; $100 / $938.06 = 10.66%. 8. Of the following four investments, _ is considered the safest. A) commercial paper B) corporate bonds C) U. S. Agency issues
8、 D) Treasury bonds E) Treasury bills Answer: E Difficulty: Easy Rationale: Only Treasury issues are insured by the U. S. government; the shorter-term the instrument, the safer the instrument. 9. To earn a high rating from the bond rating agencies, a firm should have A) a low times interest earned ra
9、tio B) a low debt to equity ratio C) a high quick ratio D) B and C E) A and C Answer: D Difficulty: Easy Rationale: High values for the times interest and quick ratios and a low debt to equity ratio are desirable indicators of safety. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - -
10、 -第 3 页，共 39 页 - - - - - - - - - - 10. At issue, coupon bonds typically sell _. A) above par value B) below par C) at or near par value D) at a value unrelated to par E) none of the above Answer: C Difficulty: Easy Rationale: If the investment banker has appraised the market and the quality of the b
11、ond correctly, the bond will sell at or near par (unless interest rates have changed very dramatically and very quickly around the time of issuance). 11. Accrued interest A) is quoted in the bond price in the financial press. B) must be paid by the buyer of the bond and remitted to the seller of the
12、 bond. C) must be paid to the broker for the inconvenience of selling bonds between maturity dates. D) A and B. E) A and C. Answer: B Difficulty: Moderate Rationale: Accrued interest must be paid by the buyer, but is not included in the quotations page price. 12. The invoice price of a bond that a b
13、uyer would pay is equal to A) the asked price plus accrued interest. B) the asked price less accrued interest. C) the bid price plus accrued interest. D) the bid price less accrued interest. E) the bid price. Answer: A Difficulty: Easy Rationale: The buyer of a bond will buy at the asked price and w
14、ill also be invoiced for any accrued interest due to the seller. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 4 页，共 39 页 - - - - - - - - - - 13. An 8% coupon U. S. Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15. The accrued int
15、erest on the $100,000 face value of this note is _. A) $491.80 B) $800.00 C) $983.61 D) $1,661.20 E) none of the above Answer: D Difficulty: Moderate Rationale: 76/183($4,000) = $1,661.20. Approximation: .08/12*100,000=666.67 per month. 666.67/month * 2.5 months = 1.666.67. 14. A coupon bond is repo
16、rted as having an ask price of 113% of the $1,000 par value in the Wall Street Journal. If the last interest payment was made two months ago and the coupon rate is 12%, the invoice price of the bond will be _. A) $1,100 B) $1,110 C) $1,150 D) $1,160 E) none of the above Answer: C Difficulty: Moderat
17、e Rationale: $1,130 + $20 (accrued interest) = $1,150. 15. The bonds of Ford Motor Company have received a rating of D by Moodys. The D rating indicates A) the bonds are insured B) the bonds are junk bonds C) the bonds are referred to as high yield bonds D) A and B E) B and C Answer: E Difficulty: E
18、asy Rationale: D ratings are risky bonds, often called junk bonds (or high yield bonds by those marketing such bonds). 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 5 页，共 39 页 - - - - - - - - - - 16. The bond market A) can be quite thin. B) primarily consists of a network of b
19、ond dealers in the over the counter market. C) consists of many investors on any given day. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: The bond market, unlike the stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers. 17. Ceteris paribus,
20、the price and yield on a bond are A) positively related. B) negatively related. C) sometimes positively and sometimes negatively related. E) not related. E) indefinitely related. Answer: B Difficulty: Easy Rationale: Bond prices and yields are inversely related. 18. The _ is a measure of the average
21、 rate of return an investor will earn if the investor buys the bond now and holds until maturity. A) current yield B) dividend yield C) P/E ratio D) yield to maturity E) discount yield Answer: D Difficulty: Easy Rationale: The current yield is the annual interest as a percent of current market price
22、; the other choices do not apply to bonds. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 6 页，共 39 页 - - - - - - - - - - 19. The _ gives the number of shares for which each convertible bond can be exchanged. A) conversion ratio B) current ratio C) P/E ratio D) conversion premiu
23、m E) convertible floor Answer: A Difficulty: Easy Rationale: The conversion premium is the amount for which the bond sells above conversion value; the price of bond as a straight bond provides the floor. The other terms are not specifically relevant to convertible bonds. 20. A coupon bond is a bond
24、that _. A) pays interest on a regular basis (typically every six months) B) does not pay interest on a regular basis but pays a lump sum at maturity C) can always be converted into a specific number of shares of common stock in the issuing company D) always sells at par E) none of the above Answer:
25、A Difficulty: Easy Rationale: A coupon bond will pay the coupon rate of interest on a semiannual basis unless the firm defaults on the bond. Convertible bonds are specific types of bonds. 21. A _ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specified pri
26、ce after a specific date. A) callable B) coupon C) put D) Treasury E) zero-coupon Answer: C Difficulty: Easy Rationale: Any bond may be redeemed prior to maturity, but all bonds other than put bonds are redeemed at a price determined by the prevailing interest rates. 精品资料 - - - 欢迎下载 - - - - - - - -
27、- - - 欢迎下载 名师归纳 - - - - - - - - - -第 7 页，共 39 页 - - - - - - - - - - 22. Callable bonds A) are called when interest rates decline appreciably. B) have a call price that declines as time passes. C) are called when interest rates increase appreciably. D) A and B. E) B and C. Answer: D Difficulty: Easy
28、Rationale: Callable bonds often are refunded (called) when interest rates decline appreciably. The call price of the bond (approximately par and one years coupon payment) declines to par as time passes and maturity is reached. 23. A Treasury bond due in one year has a yield of 5.7%; a Treasury bond
29、due in 5 years has a yield of 6.2%. A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, are A) 1.0% and 1.2% B) 0.7% and 1.5% C) 1.2% and
30、 1.0% D) 0.8% and 1.3% E) none of the above Answer: D Difficulty: Moderate Rationale: Shell: 6.5% - 5.7% = .8%; Ford: 7.5% - 6.2% = 1.3%. 24. A Treasury bond due in one year has a yield of 4.6%; a Treasury bond due in 5 years has a yield of 5.6%. A bond issued by Lucent Technologies due in 5 years h
31、as a yield of 8.9%; a bond issued by Mobil due in one year has a yield of 6.2%. The default risk premiums on the bonds issued by Mobil and Lucent Technologies, respectively, are: A) 1.6% and 3.3% B) 0.5% and .7% C) 3.3% and 1.6% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: Moderate Ra
32、tionale: Mobil: 6.2% - 4.6% = 1.6%; Lucent Technologies: 8.9% - 5.6% = 3.3%. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 8 页，共 39 页 - - - - - - - - - - 25. A Treasury bond due in one year has a yield of 6.2%; a Treasury bond due in 5 years has a yield of 6.7%. A bond issued
33、by Xerox due in 5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued by Exxon and Xerox, respectively, are A) 1.0% and 1.2% B) 0.5% and .7% C) 1.2% and 1.0% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: M
34、oderate Rationale: Exxon: 7.2% - 6.2% = 1.0%; Xerox: 7. 9% - 6.7% = 1.2%. 26. Floating-rate bonds are designed to _ while convertible bonds are designed to _. A) minimize the holders interest rate risk; give the investor the ability to share in the price appreciation of the companys stock B) maximiz
35、e the holders interest rate risk; give the investor the ability to share in the price appreciation of the companys stock C) minimize the holders interest rate risk; give the investor the ability to benefit from interest rate changes D) maximize the holders interest rate risk; give investor the abili
36、ty to share in the profits of the issuing company E) none of the above Answer: A Difficulty: Moderate Rationale: Floating rate bonds allow the investor to earn a rate of interest income tied to current interest rates, thus negating one of the major disadvantages of fixed income investments. Converti
37、ble bonds allow the investor to benefit from the appreciation of the stock price, either by converting to stock or holding the bond, which will increase in price as the stock price increases. 27. A coupon bond that pays interest annually is selling at par value of $1,000, matures in 5 years, and has
38、 a coupon rate of 9%. The yield to maturity on this bond is: A) 8.0% B) 8.3% C) 9.0% D) 10.0% E) none of the above Answer: C Difficulty: Easy Rationale: When a bond sells at par value, the coupon rate is equal to the yield to maturity. 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - -
39、- -第 9 页，共 39 页 - - - - - - - - - - 28. A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be _ if the coupon rate is 7%. A) $712.99 B) $620.92 C) $1,123.01 D) $886.28 E) $1,000.00 An
40、swer: D Difficulty: Moderate Rationale: FV = 1000, PMT = 70, n = 5, i = 10, PV = 886.28. 29. A coupon bond that pays interest annually, has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be _ if the coupon rate is 12%. A) $92
41、2.77 B) $924.16 C) $1,075.82 D) $1,077.20 E) none of the above Answer: C Difficulty: Moderate Rationale: FV = 1000, PMT = 120, n = 5, i = 10, PV = 1075.82 30. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrins
42、ic value of the bond today will be _ if the coupon rate is 8%. A) $922.78 B) $924.16 C) $1,075.80 D) $1,077.20 E) none of the above Answer: A Difficulty: Moderate Rationale: FV = 1000, PMT = 40, n = 10, i = 5, PV = 922.78 精品资料 - - - 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 10 页，共 39
43、 页 - - - - - - - - - - 31. A coupon bond that pays interest semi-annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be _ if the coupon rate is 12%. A) $922.77 B) $924.16 C) $1,075.80 D) $1,077.22 E) none of the above
44、 Answer: D Difficulty: Moderate Rationale: FV = 1000, PMT = 60, n = 10, i = 5, PV = 1077.22 32. A coupon bond that pays interest of $100 annually has a par value of $1,000, matures in 5 years, and is selling today at a $72 discount from par value. The yield to maturity on this bond is _. A) 6.00% B)
45、 8.33% C) 12.00% D) 60.00% E) none of the above Answer: C Difficulty: Moderate Rationale: FV = 1000, PMT = 100, n = 5, PV = -928, i = 11.997% 33. You purchased an annual interest coupon bond one year ago that now has 6 years remaining until maturity. The coupon rate of interest was 10% and par value
46、 was $1,000. At the time you purchased the bond, the yield to maturity was 8%. The amount you paid for this bond one year ago was A) $1,057.50. B) $1,075.50. C) $1,088.50. D) $1.092.46. E) $1,104.13. Answer: E Difficulty: Moderate Rationale: FV = 1000, PMT = 100, n = 7, i = 8, PV = 1104.13 精品资料 - -
47、- 欢迎下载 - - - - - - - - - - - 欢迎下载 名师归纳 - - - - - - - - - -第 11 页，共 39 页 - - - - - - - - - - 34. You purchased an annual interest coupon bond one year ago that had 6 years remaining to maturity at that time. The coupon interest rate was 10% and the par value was $1,000. At the time you purchased the
48、bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been _. A) 7.00% B) 7.82% C) 8.00% D) 11.95% E) none of the above Answer: C
49、Difficulty: Difficult Rationale: FV = 1000, PMT = 100, n = 6, i = 8, PV = 1092.46; FV = 1000, PMT = 100, n = 5, i = 8, PV = 1079.85; HPR = (1079.85 - 1092.46 + 100) / 1092.46 = 8% 35. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $1
50、20 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 10%, _. A) both bonds will increase in value, but bond A will increase more than bond B B) both bonds will increase in value, but bond B will increase more th