Chapter 6
93. Consider a one-year corporate bond that has a 20% probability of default. The payoff on the bond is $2,000 if the corporation does not default. The interest rate is 10%. If buyers of this bond are risk-neutral, this bond will sell for: A. $400 B. $909.09 C. $1,454.54 D. $1,600
$1,454.54
5. Which of the following best expresses the formula for determining the price of a U.S. Treasury bill that matures n periods from now per $100 of face value when the interest rate is i? A. $100/(1 + i)n B. $100(1 + i) C. $100/(1 + i) D. 1 + $100/(1 + i)n
$100/(1 + i)n
18. If a consol is offering an annual coupon of $50 and the annual interest rate is 6%, the price of the consol is: A. $47.17 B. $813.00 C. $833.33 D. $8333.33
$833.33
9. If the annual interest rate is 5%(.05), the price of a one-year Treasury bill per $100 of face value would be: A. $95.00 B. $97.50 C. $95.24 D. $96.10
$95.24
10. If the annual interest rate is 5%(.05), the price of a six-month Treasury bill would be: A. $97.50 B. $97.59 C. $95.25 D. $95.00
$97.59
11. If the annual interest rate is 5%(.05), the price of a three-month Treasury bill would be: A. $98.79 B. $95.00 C. $98.75 D. $97.59
$98.79
34. A 30-year Treasury bond as a face value of $1,000, price of $1,200 with a $50 coupon payment. Assume the price of this bond decreases to $1,100 over the next year. The one-year holding period return is equal to: A. -9.17%. B. -8.33%. C. -4.17%. D. -3.79%.
-4.17%.
89. Fly-By-Night Inc. issues $100 face value, zero-coupon, one-year bonds. The current return on one-year, zero-coupon U.S. government bonds is 3.5%. If the Fly-By-Night bonds are selling for $92.00, what is the risk premium for these bonds? A. 8.7% B. 1.5% C. 5.2% D. 8.0%
5.2%
91. Consider the bonds below. Which is subject to the greatest interest-rate risk? A. A 30-year fixed-rate mortgage (fixed payment loan) B. A consol C. A Treasury bill D. A 20-year corporate bond
A consol
99. Interest-rate risk would not matter to which of the following bondholders? A. A holder of a U.S. government bond. B. A holder of a U.S. government bond indexed for inflation. C. A holder of a U.S. government bond who plans on selling it in one year. D. A holder of a U.S. government bond that plans on holding it until it matures.
A holder of a U.S. government bond that plans on holding it until it matures.
67. Which of the following would lead to an increase in bond supply? A. A decrease in government spending relative to revenue. B. An increase in corporate taxes. C. A decrease in expected inflation. D. An improvement in general business conditions.
An improvement in general business conditions.
68. Which of the following would lead to a decrease in bond demand? A. An increase in expected inflation. B. An increase in wealth. C. A decrease in risk. D. A decrease in liquidity.
An increase in expected inflation.
31. Which of the following is not a reason why the yield to maturity can differ from the current yield? A. Because the yield to maturity considers the capital gain/loss. B. Because the current yield focuses only on the coupon payment and the purchase price. C. Because most bonds are not purchased for face value. D. Because the current yield moves in the opposite direction from price.
Because the current yield moves in the opposite direction from price.
85. The market for bonds is initially described by the supply of bonds - S0, and the demand for bonds - D0, with the equilibrium price and quantity being P0 and Q0. An increase in the nation's wealth, all else constant, would cause the A. Bond supply curve to shift to S1. B. Bond demand curve to shift to D1. C. Bond supply curve to shift to S2. D. Bond demand curve to shift to D2.
Bond demand curve to shift to D1.
86. The market for bonds is initially described by the supply of bonds - S0, and the demand for bonds - D0, with the equilibrium price and quantity being P0 and Q0. Suppose that the expected return on bonds falls relative to other assets. In the bond market this will result in: A. Bond supply curve to shift to S1 B. Bond demand curve to shift to D1 C. Bond supply curve to shift to S2 D. Bond demand curve to shift to D2
Bond demand curve to shift to D2
87. The market for bonds is initially described by the supply of bonds - S0, and the demand for bonds - D0, with the equilibrium price and quantity being P0 and Q0. If the federal government were to offer larger tax breaks on the purchase of new equipment for businesses, all other factors constant, we would expect to see: A. Bond supply curve to shift to S1 B. Bond demand curve to shift to D1 C. Bond supply curve to shift to S2 D. Bond demand curve to shift to D2
Bond supply curve to shift to S1
88. The market for bonds is initially described by the supply of bonds - S0, and the demand for bonds - D0, with the equilibrium price and quantity being P0 and Q0. If the U.S. government's borrowing needs decrease, all other factors constant: A. Bond supply curve to shift to S1 B. Bond demand curve to shift to D1 C. Bond supply curve to shift to S2 D. Bond demand curve to shift to D2
Bond supply curve to shift to S2
17. The price (P) of a consol offering an annual coupon payment (C) is best expressed by: A. F/C B. C(1 + i) C. C/(1 + i) D. C/i
C/i
7. Which of the following makes fixed payments indefinitely? A. Amortized loan B. Consol C. Coupon bond D. Zero-coupon bond
Consol
42. Which of the following best expresses the equation for holding period return? A. Current yield + coupon rate B. Yield to maturity - current yield C. Current yield + capital gain D. Coupon rate + capital gain
Current yield + capital gain
95. Which of the following is true of interest-rate risk? A. It is the risk that the coupon rate for a bond will change, affecting current bondholders' coupon payments. B. It refers to the probability that a borrower will default on debt obligations. C. It is the risk that the face value of a bond will change before maturity. D. Individuals owning long-term bonds are exposed to greater interest-rate risk.
Individuals owning long-term bonds are exposed to greater interest-rate risk.
84. Which of the following statements about the result of a deterioration in business conditions that also causes a decrease in a nation's wealth is false? A. The impact on bond prices will be ambiguous since both the bond demand and supply curves shift left. B. The price of bonds will increase if bond supply decreases more than bond demand. C. Interest rates will increase if bond demand decreases more than bond supply. D. Neither bond demand nor bond supply will shift.
Neither bond demand nor bond supply will shift.
94. A student receives a five-year loan to pay for a $2,000 used car. The lender and the student agree to an 8% interest rate on a fixed-rate loan. Expected inflation was estimated to equal 2.5%, but unexpectedly decreases to 2%. Which of the following is true? A. The real interest rate decreased. B. The student is made worse off because her real cost of borrowing is higher. C. The lender is made worst off because his real return on the car loan is lower. D. Both the student and the lender benefit.
The student is made worse off because her real cost of borrowing is higher.
4. The most common form of zero-coupon bonds found in the United States is: A. AAA rated corporate bonds. B. U.S. Treasury bills. C. 30-year U.S. Treasury bonds. D. municipal bonds.
U.S. Treasury bills.
6. Once you buy a coupon bond, which of the following can change? A. Coupon rate B. Coupon payment C. Face value D. Yield to maturity
Yield to maturity
19. Which of the following statements is most accurate? A. Yield to maturity is equal to the coupon rate if the bond is held to maturity. B. Yield to maturity is the same as the coupon rate. C. Yield to maturity will exceed the coupon rate if the bond is purchased for face value. D. Yield to maturity is the same as the coupon rate if the bond is purchased for face value and held to maturity.
Yield to maturity is the same as the coupon rate if the bond is purchased for face value and held to maturity.
2. A consol is: A. another name for a zero-coupon bond. B. a bond with a maturity date exceeding 10 years. C. a bond that makes periodic interest payments forever. D. a form of a bond that is issued quite often by the U.S. Treasury.
a bond that makes periodic interest payments forever.
98. Interest-rate risk results from: A. bond prices being fixed over the life of the bond. B. a mismatch between an individual's investment horizon and a bond's maturity. C. the fact that most people hold bonds until they mature. D. inflation being uncertain.
a mismatch between an individual's investment horizon and a bond's maturity.
75. Suppose that the expected return on bonds falls relative to other assets. In the bond market this will result in: A. the bond supply curve shifting left. B. a movement down the bond demand curve. C. a shift to the left of the bond demand curve. D. an increase in the price of bonds.
a shift to the left of the bond demand curve.
41. One characteristic that distinguishes holding period return from the coupon rate, the current yield, and the yield to maturity is: A. all of the other returns can be calculated at the time the bond is purchased, but holding period return cannot. B. holding period return will always be the highest return. C. holding period return will usually be less than the other returns. D. only the holding period return includes the capital gain/loss.
all of the other returns can be calculated at the time the bond is purchased, but holding period return cannot.
77. The return on bonds rises relative to other assets, in the bond market this will result in: A. the price of bonds falling and the yields increasing. B. a rightward shift in the bond supply curve. C. a shift to the left of the bond demand curve. D. an increase in bond prices.
an increase in bond prices.
50. The bond demand curve slopes downward because: A. at lower prices the reward for holding the bond increases. B. as bond prices fall so do yields. C. as bond prices fall bonds are less attractive. D. as bond prices rise yields increase.
at lower prices the reward for holding the bond increases.
69. An increase in the nation's wealth, all other factors constant, would cause the: A. bond supply curve to shift left. B. bond demand curve to shift left. C. bond supply curve to shift right. D. bond demand curve to shift right.
bond demand curve to shift right.
58. As general business conditions improve, we would witness the following in the bond market: A. the bond demand curve shifting left. B. the bond supply curve shifting left. C. bond prices decreasing. D. bond prices increasing.
bond prices decreasing.
73. A decrease in expected inflation for any given nominal interest rate will cause: A. bond prices to increase and interest rates to decrease. B. bond prices to decrease and interest rates to increase. C. the bond demand curve to shift to the left. D. the bond supply curve to shift to the left.
bond prices to increase and interest rates to decrease.
70. An increase in the nation's wealth, all other factors constant, would cause: A. bond prices to fall and yields to increase. B. bond prices and yields to increase. C. bond prices to rise and yields to decrease. D. the bond supply curve to shift right.
bond prices to rise and yields to decrease.
66. If the federal government were to offer larger tax breaks on the purchase of new equipment for businesses, all other factors constant, we would expect to see the: A. bond demand curve shift right. B. bond supply curve shift left. C. bond supply curve shift right. D. bond demand curve shift left.
bond supply curve shift right.
56. If the U.S. government's borrowing needs increase, in the bond market this would be seen as the: A. bond demand curve shifting right. B. bond supply curve shifting right. C. bond demand curve shifting left. D. bond supply curve shifting left.
bond supply curve shifting right.
64. When expected inflation increases, for any given nominal interest rate the: A. bond demand curve shifts right. B. bond supply curve shifts right. C. price of bonds increases. D. yield on bonds will increase.
bond supply curve shifts right.
44. The holding period return has relevance because: A. most bonds are held by the original purchaser until maturity. B. most bonds are held by the original purchaser until they mature. C. bonds are frequently traded. D. current yields are not that important to bondholders.
bonds are frequently traded.
62. When expected inflation increases, for any given nominal interest rate the: A. cost of borrowing increases and the desire to borrow decreases. B. real interest rate increases. C. bond supply curve shifts to the left. D. cost of borrowing decreases and the desire to borrow increases.
cost of borrowing decreases and the desire to borrow increases.
63. When expected inflation decreases for any given nominal interest rate, all of the following occur except the: A. real interest rate decreases. B. bond supply curve shifts to the left. C. cost of borrowing increases and the desire to borrow decreases. D. price of bonds increases.
cost of borrowing increases and the desire to borrow decreases.
28. In calculating the current yield for a bond the: A. coupon payment and purchase price is all that is needed. B. present value of the capital gain/loss is ignored. C. present value of the final payment is the only important consideration. D. present value of the coupon payments is the only important consideration.
coupon payment and purchase price is all that is needed.
8. A 10-year Treasury note as a face value of $1,000, price of $1,200, and a 7.5% coupon rate. Based on this information, we know the: A. present value is greater than its price. B. current yield is equal to 8.33%. C. coupon payment on this bond is equal to $75. D. coupon payment on this bond is equal to $90.
coupon payment on this bond is equal to $75.
30. If a bond's purchase price equals the face value the: A. coupon rate equals the current yield, which is less than the yield to maturity. B. current yield equals the yield to maturity, which exceeds the coupon rate. C. coupon rate equals the yield to maturity, which equals the current yield. D. coupon rate does not equal the current yield, which does not equal the yield to maturity.
coupon rate equals the yield to maturity, which equals the current yield.
26. A $1,000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has a: A. current yield and coupon rate equal to 6.22% and a coupon rate above this. B. current yield equal to 6.22% and a coupon rate below this. C. coupon rate equal to 6.00% and a current yield below this. D. yield to maturity and current yield equal to 6.00%.
current yield equal to 6.22% and a coupon rate below this.
25. A $1,000 face value bond purchased for $965.00, with an annual coupon of $60, and 20 years to maturity has a: A. current yield equal to 6.22%. B. current yield equal to 6.00%. C. coupon rate equal to 6.22%. D. yield to maturity and current yield equal to 6.00%.
current yield equal to 6.22%.
22. When the price of a bond equals the face value the: A. yield to maturity will be above the coupon rate. B. yield to maturity will be below the coupon rate. C. current yield is equal to the coupon rate. D. yield to maturity is greater than the current yield.
current yield is equal to the coupon rate.
32. A $1000 face value bond, with one year to maturity that sells for $950 and has a $40 annual coupon has a: A. current yield and yield to maturity of 4.00%. B. yield to maturity that equals the current yield. C. coupon rate of 4.00% and a current yield that is below this. D. current yield of 4.21%.
current yield of 4.21%.
33. A $1,000 face value bond, with an annual coupon of $40, one year to maturity and a purchase price of $980 has a: A. current yield that equals 4.00%. B. coupon rate that equals 4.08%. C. current yield that equals 4.08% and a yield to maturity that equals 6.12%. D. current yield that equals 4.08% and a yield to maturity that equals 4.0%.
current yield that equals 4.08% and a yield to maturity that equals 6.12%.
45. Suppose there is a decrease in the price at which a bondholder sells her bond. In this case, the holding period return will: A. increase, since yields and prices are inversely related. B. decrease, since this lowers the capital gain. C. be negative. D. equal the coupon rate.
decrease, since this lowers the capital gain.
24. The current yield of a bond: A. is another term for the coupon rate. B. is another term for the yield to maturity. C. equals zero for a zero-coupon bond since these bonds have no coupon payments. D. is the difference between its future value and its present value.
equals zero for a zero-coupon bond since these bonds have no coupon payments.
51. If the quantity of bonds supplied exceeds the quantity of bonds demanded, bond prices would: A. rise and yields would fall. B. fall and yields would rise. C. rise but yields will remain constant. D. fall and yields would fall.
fall and yields would rise.
78. If interest rates are expected to rise, the bond prices will: A. not change until interest rates actually change. B. fall, due to the demand for bonds decreasing. C. rise, as people seek capital gains. D. move in the same direction as the expected change in interest rates.
fall, due to the demand for bonds decreasing.
14. Most home mortgages are good examples of: A. consols. B. zero-coupon bonds. C. coupon bonds. D. fixed-payment loans.
fixed-payment loans.
49. The bond supply curve slopes upward because: A. as bond prices rise people holding bonds are more tempted to hold them. B. as bond prices rise yields increase. C. for companies seeking financing, the higher the price of bonds the more attractive it is to sell bonds. D. as bond prices rise yields decrease.
for companies seeking financing, the higher the price of bonds the more attractive it is to sell bonds.
97. The U.S. Treasury issues bonds where the return is indexed to the consumer price index. We should expect that these bonds, relative to other U.S. Treasury bonds, will have: A. lower price and lower return due to the decreased risk. B. lower price and a lower fixed return since the demand for them should be higher. C. higher price and higher fixed return since we always seem to have some inflation. D. higher price and lower return due to the decreased risk from inflation in holding these bonds.
higher price and lower return due to the decreased risk from inflation in holding these bonds.
81. If the risk on foreign government bonds increases relative to U.S. government bonds, the price of U.S. government bonds should: A. not change since U.S. government bonds are free of default risk. B. decrease since people will bail out of all government bonds. C. increase as the demand for these bonds increases. D. not be affected because the two types of bonds are traded in different markets.
increase as the demand for these bonds increases.
79. If interest rates are expected to fall, bond prices will: A. fall as the demand for bonds decreases. B. remain constant until interest rates actually change. C. fall as people fear capital losses in the future. D. increase due to the demand for bonds increasing.
increase due to the demand for bonds increasing.
76. Suppose that the return on assets other than bonds falls. In the bond market this will result in a(n): A. movement down the bond demand curve. B. shift to the left of the bond demand curve. C. increase in the price of bonds. D. shift to the left of the bond supply curve.
increase in the price of bonds.
92. Consider a zero-coupon bond with a $1,100 payment in one year. Suppose the interest rate decreases from 10% to 8%. The price of this bond: A. increases from $1,000 to $1,018. B. increases from $1,000 to $1,375. C. decreases from $110 to $88. D. decreases from $1,210 to $1,188.
increases from $1,000 to $1,018.
96. U.S. government bonds that provide for bondholders to receive a fixed rate of interest plus the change in the consumer price index were designed to remove: A. default risk. B. liquidity risk. C. inflation risk. D. interest-rate risk.
inflation risk.
12. The relationship between the price and the interest rate for a zero coupon bond is best described as: A. volatile. B. fluctuating. C. inverse. D. non-existent.
inverse.
20. When the price of a bond is above face value the yield to maturity: A. is below the coupon rate. B. will be above the coupon rate. C. will equal the current yield. D. will equal the coupon rate.
is below the coupon rate.
39. The larger the bond dealer's spread the: A. less liquid is the market for that bond. B. greater is the coupon rate for that bond. C. more liquid is the market for that bond. D. less risk there is for the dealer to hold that bond.
less liquid is the market for that bond.
38. The size of the bond dealer's spread is mainly a function of the: A. purchase price of the bond. B. current yield. C. liquidity of the bond market. D. face value of the bond.
liquidity of the bond market.
82. The demand for U.S. government bonds is high relative to other bond issues because: A. liquidity of other bond issues is high relative to U.S. government bonds. B. U.S. bond market has low transaction spreads due to high illiquidity. C. market for U.S. government bonds is more liquid than most if not all other bond markets. D. U.S. government bonds have higher default.
market for U.S. government bonds is more liquid than most if not all other bond markets.
43. In considering the holding period return, the longer the term of the bond the: A. less important is the capital gain and the more important in the current yield. B. less important is the coupon rate and the more important is the current yield. C. less important is the capital gain. D. more important is the capital gain.
more important is the capital gain.
47. Bond prices and yields: A. move together in the same direction. B. do not change if the coupon is fixed. C. move together inversely. D. are independent of each other.
move together inversely.
27. In calculating the current yield for a bond the: A. coupon payment is ignored. B. present value of the capital gain/loss is ignored. C. present value of the final payment is the only important consideration. D. present value of the coupon payments is the only important consideration.
present value of the capital gain/loss is ignored.
15. The price of a coupon bond can best be described as the: A. present value of the face value. B. future value of the coupon payments. C. future value of the coupon payments and the face value. D. present value of the face value plus the present value of the coupon payments.
present value of the face value plus the present value of the coupon payments.
72. An increase in expected inflation for any given nominal interest rate will cause the: A. bond supply curve to shift to the left. B. bond demand curve to shift to the right. C. price of bonds to decrease. D. price of bonds to increase.
price of bonds to decrease.
54. If the U.S. government's borrowing needs decrease, all other factors constant the: A. supply of bonds will increase. B. demand for bonds will decrease. C. price of bonds will decrease. D. price of bonds will increase.
price of bonds will increase.
13. When a loan is amortized, it means the: A. borrower is in default. B. principal and interest are paid off by the borrower over the life of the loan. C. interest is due entirely at the maturity date. D. principal in never repaid, only interest.
principal and interest are paid off by the borrower over the life of the loan.
1. A zero-coupon bond refers to a bond which: A. does not pay any coupon payments because the issuer is in default. B. promises a single future payment. C. pays coupons only once a year. D. pays coupons only if the bond price is above face value.
promises a single future payment.
29. When the current yield and the coupon rate are equal, the bond is: A. purchased at a discount. B. purchased at a price that equals the face value. C. a zero-coupon bond. D. purchased at a price that exceeds its face value.
purchased at a price that equals the face value.
65. When expected inflation increases, for any given nominal interest rate the: A. real cost of repayment for bond issuers increases. B. real return for bondholders increases. C. real cost of repayment for bond issuers decreases. D. bond demand curve shifts right.
real cost of repayment for bond issuers decreases.
53. If the U.S. government's borrowing needs increase, all other factors constant the: A. demand for bonds will decrease. B. price of bonds will increase. C. supply of bonds will increase. D. yields on bonds will decrease.
supply of bonds will increase.
55. If the U.S. government's borrowing needs increase, all other factors constant the: A. price of bonds will increase. B. supply of bonds will increase. C. demand for bonds will decrease. D. supply of bonds and the demand for bonds will both increase.
supply of bonds will increase.
36. In reading bond quotes: A. the bid price is usually above the asked price. B. the asked price is fixed over the life of the bond. C. the asked price is usually above the bid price. D. bid and asked prices must be equal as set forth by SEC regulations.
the asked price is usually above the bid price.
37. The bond dealer's spread is: A. the asking price less the bid price. B. the difference between the current yield and the yield to maturity. C. the bid price less the asking price. D. usually negative; the dealer makes a profit holding the bonds.
the asking price less the bid price.
71. A decrease in the nation's wealth, all other factors constant, would cause: A. the bond demand curve to shift left. B. bond prices to rise. C. interest rates to decrease. D. the bond supply curve to shift left.
the bond demand curve to shift left.
90. Default risk is the risk associated with: A. the bond issuer not being able to make the promised payments. B. the illiquidity associated with small issues. C. the effect on bond prices caused by changes in market rates of interest. D. changes in the expected inflation rate.
the bond issuer not being able to make the promised payments.
57. If the U.S. government's borrowing needs increase, in the bond market this would be seen as: A. the bond demand curve shifting right. B. a movement up the bond supply curve. C. the bond demand curve shifting left. D. the bond supply curve shifting right.
the bond supply curve shifting right.
61. As general business conditions deteriorate, all other factors constant: A. the bond supply curve will shift left. B. there will be a movement down the existing bond supply curve. C. the bond demand curve shifts left. D. the price of bonds will decrease.
the bond supply curve will shift left.
59. As general business conditions deteriorate, all other factors constant: A. the demand for bonds will decrease. B. the supply of bonds will increase. C. bond prices will decrease. D. bond yields will increase.
the demand for bonds will decrease.
16. The difference in the prices of a zero-coupon bond and a coupon bond with the same face value and maturity date is simply: A. zero, since they are the same. B. the present value of the final payment. C. the present value of the coupon payments. D. the future value of the coupon payments.
the present value of the coupon payments.
35. The bid price for a bond quote is: A. the price at which the bond dealer is willing to sell the bond. B. the price at which the bond dealer is willing to purchase the bond. C. fixed over the life of a bond. D. determined solely by the time left to maturity.
the price at which the bond dealer is willing to purchase the bond.
80. Suppose that general business conditions improve, and at the same time, wealth increases. Based on this information, we know that: A. bond prices increase. B. yield to maturity decreases. C. the real interest rate increases. D. the quantity of bonds increases.
the quantity of bonds increases.
48. As bond prices increase: A. the quantity of bonds supplied increases. B. the quantity of bonds supplied decreases. C. the quantity of bonds demanded increases. D. yields increases.
the quantity of bonds supplied increases.
74. An increase in expected inflation for any given nominal interest rate will cause: A. the real return to bondholders to decrease. B. a movement down the bond demand curve, but no change in the bond demand curve. C. the bond demand curve to shift right. D. the price of bonds to increase.
the real return to bondholders to decrease.
21. When the price of a bond is below the face value, the yield to maturity: A. is below the coupon rate. B. will be above the coupon rate. C. will equal the current yield. D. will equal the coupon rate.
will be above the coupon rate.
23. If the purchase price of a bond exceeds the face value, the yield to maturity: A. is greater than the coupon rate because the capital gain is positive. B. will equal the current yield. C. will be less than the coupon rate because the capital gain will be negative. D. will be greater than the current yield.
will be less than the coupon rate because the capital gain will be negative.
40. The holding period return on a bond: A. can never be more than the yield to maturity. B. will equal the yield to maturity if the bond is purchased for face value and sold at a lower price. C. will be less than the yield to maturity if the bond is sold for more than face value. D. will be less than the yield to maturity if the bond is sold for less than face value.
will be less than the yield to maturity if the bond is sold for less than face value.
83. The impact of a decrease in expected inflation in the bond market will have a relatively large effect on the prices of bonds prices because the bond demand curve: A. will shift right as will the bond supply curve. B. will shift right but the bond supply curve shifts left. C. and supply curves will shift left. D. will shift left as the bond supply curve shifts right.
will shift right but the bond supply curve shifts left.
52. If the quantity of bonds demanded exceeds the quantity of bonds supplied, bond prices: A. would rise and yields would fall. B. would fall and yields would increase. C. will rise and yields will remain constant. D. will rise and yields would increase.
would rise and yields would fall.
60. As general business conditions improve, all other factors constant the: A. price of bonds will increase. B. yield on bonds will increase. C. bond demand curve shifts right. D. bond supply curve shifts left.
yield on bonds will increase.
46. If a one-year zero-coupon bond has a face value of $100, is purchased for $94, and is held to maturity the: A. holding period return will exceed the yield to maturity. B. yield to maturity will exceed the holding period return. C. yield to maturity will be 6.38%. D. holding period return is 6.0%.
yield to maturity will be 6.38%.
3. A pure discount bond is also known as a: A. consol. B. fixed payment loan. C. coupon bond. D. zero-coupon bond.
zero-coupon bond.