Bond Practice - Chapter 7

Assume the current market price of a bond exceeds its par value. Which one of these equations applies?

Yield to maturity < Coupon rate

A bond that can be paid off early at the issuer's discretion is referred to as being which type of bond?

Callable

Which one of the following risks would a floating-rate bond tend to have less of as compared to a fixed-rate coupon bond?

Interest rate risk

A premium bond that pays $60 in interest annually matures in seven years. The bond was originally issued three years ago at par. Which one of the following statements is accurate in respect to this bond today?

The yield to maturity is less than the coupon rate.

A six-year, $1,000 face value bond issued by Nguyen Corporation pays interest semiannually on February 1 and August 1. Assume today is October 1. What is the current difference, if any, between this bond's clean and dirty prices?

Two months' interest

U. S. Treasury bonds: - are highly illiquid. - are quoted as a percentage of par. - are quoted at the dirty price. - pay interest that is federally tax-exempt. - must be held until maturity.

are quoted as a percentage of par

If you sell a bond with a coupon of 6 percent to a dealer when the market rate is 7 percent, which one of the following prices will you receive?

bid price

A bond is quoted at a price of $1,037. This price is referred to as the:

clean price

Ana just received the semiannual payment of $35 on a bond she owns. This is called the ______ payment.

coupon

A discount bond's coupon rate is equal to the annual interest divided by the:

face value

Treasury bonds are:

generally issued as semiannual coupon bonds.

The current yield is defined as the annual interest on a bond divided by the:

market price

Olivares, Incorporated, bonds mature in 17 years and have a coupon rate of 5.4 percent. If the market rate of interest increases, then the:

market price of the bond will decrease

Which one of the following rates represents the change, if any, in your purchasing power as a result of owning a bond?

real rate

The difference between the price that a dealer is willing to pay and the price at which he or she is willing to sell is called the:

spread