finance 2000 exam 3
a bond issued by a corporation on october 1, 2007, is scheduled to mature on october 1, 3007. if today is october 2, 2009, what is the bond's time to maturity? (assume annual interest payments)
998 years
consider the following three bond quotes; a treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. if the treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?
$1,023.00, $994.50, $5,122.50, respectively
a 4.5 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
$1,045
a 5.5 percent corporate coupon bond is callable in four years for a call premium of one year of coupon payments. assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond? (assume annual interest payments)
$1,055
a 6 percent corporate coupon bond is callable in ten years for a call premium of one year of coupon payments. assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?
$1,060
which of the following bonds makes no interest payments?
zero coupon bond
a 3 3/4 percent TIPS has an original reference CPI of 175.8. if the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (assume semi-annual interest payments and $1,000 par value)
$1,181.46, $22.15, respectively
a 2 1/2 percent TIPS has an original reference CPI of 170.4. if the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (assume semi-annual interest payments and $1,000 par value)
$1,207.16, $15.09, respectively
calculate the price of a 6.5% coupon bond with 27 years left to maturity and a market interest rate of 5%. (assume interest payments are semiannual and par value is $1,000) is this a discount or premium bond?
$1,220.93; premium
determine the interest payment for the following three bonds: 2 1/2 percent coupon corporate bond (paid semi-annually), 3.15 percent coupon treasury note, and a corporate zero coupon bond maturing in 10 years. (assume a $1,000 par value)
$12.50, $15.75, $0, respectively
calculate the price of a zero coupon bond that matures in 20 years if the market interest rate is 8.5% (assume interest payments are semiannual and par value is $1,000)
$195.62
determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon treasury note, and a corporate zero coupon bond maturing in 15 years. (assume a $1,000 par value)
$20.00, $23.75, $0, respectively
a 6 percent coupon bond with 12 years left to maturity is priced to offer a 6.5 percent yield to maturity. you believe that in one year, the yield to maturity will be 6.25 percent. what is the change in price the bond will experience in dollars? (assume interest payments are semi-annual and par value is $1,000)
$21.55
a 3.75% TIPS has an original reference CPI of 183.9. if the current CPI is 214.7, what is the current interest payment? (assume semi-annual interest payments and a par value of $1,000)
$21.89
an 8 percent coupon bond with 15 years left to maturity is priced to offer a 9% yield to maturity. you believe that in one year, the yield to maturity will be 6.5%. what is the change in price the bond will experience in dollars? (assume interest payments are semi-annual and par value is $1,000)
$215.82
consider a 3.25% TIPS with an issue CPI reference of 186.7. at the beginning of this year, the CPI was 197.5 and was at 202.4 at the end of the year. what was the capital gain of the TIPS in dollars? (assume semi-annual interest payments and $1,000 par value)
$26.25
determine the interest payment for the following three bonds: 5 1/2 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon treasury note, and a corporate zero coupon bond maturing in 10 years. (assume a $1,000 par value)
$27.50, $32.25, $0, respectively
consider a 2.75% TIPS with an issue CPI reference of 184.2. at the beginning of this year, the CPI was 195.4 and was at 200.5 at the end of the year. what was the capital gain of the TIPS in dollars?
$27.69
consider the following bond quote: a municipal bond quoted at 101.25. if the municipal bond has a par value of $5,000 what is the price of the bond in dollars?
$5,062.50
a 5.5 percent coupon bond with 18 years left to maturity is priced to offer a 6.25 percent yield to maturity. you believe that in one year, the yield to maturity will be 5.75 percent. what is the change in price the bond will experience in dollars? (assume interest payments are semi-annual and par value is $1,000)
$53.48
calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (assume semi-annual compounding and $1,000 par value)
$553.68
calculate the price of a 6.5% coupon bond with 17 years left to maturity and a market interest rate of 10.5%. (assume interest payments are semiannual and par value is $1,000) is this a discount or premium bond?
$685.93; discount
calculate the price of a zero coupon bond that matures in 5 years if the market interest rate is 7.50 percent. (assume semi-annual compounding and $1,000 par value)
$692.02
consider a 4.5% TIPS with an issue CPI reference of 187.2. at the beginning of this year, the CPI was 199.5 and was 213.7 at the end of the year. what was the capital gain of the TIPS in dollars
$75.85
consider the following three bond quotes; a treasury note quoted at 87.25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. if the treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?
$877.81, $1,024.20, $50,72.50, respectively
a 5 1/8% TIPS has an original reference CPI of 191.8. if the current CPI is 188.3, what is the par value of the TIPS?
$981.75
a bond issued by a corporation on may 1, 1999, is scheduled to mature on may 1, 2019. if today is may 2, 2009, what is the bond's time to maturity? (assume annual interest payments)
10 years
a 6.5 percent coupon bond with 12 years left to maturity can be called in 4 years. the call premium is one year of coupon payments. it is offered for sale at $1,190.25. what is the yield to call of the bond? (assume interest payments are semi-annual and par value is $1,000)
2.96%
a 4.25 percent coupon bond with 8 years left to maturity is offered for sale at $983.36. what yield to maturity is the bond offering? (assume interest payments are semi-annual and par value is $1,000)
4.50%
consider a 3.75% TIPS with an issue CPI reference of 183.5. at the beginning of this year, the CPI was 190.6 and was at 199.4 at the end of the year. what was the capital gain of the TIPS in percentage terms? (assume semi-annual interest payments and $1,000 par value)
4.62%
a 4.75 percent coupon bond with 12 years left to maturity can be called in 2 years the call premium is one year of coupon payments. it is offered for sale at $1,037.35. what is the yield to call of the bond? (assume interest payments are semi-annual and par value is $1,000)
5.05%
a 3.25 percent coupon bond with 12 years left to maturity and has a price quote of 98.75. the bond can be called in 5 years. the call premium is one year of coupon payments. what is the bond's taxable equivalent yield for an investor in the 35 percent marginal tax bracket? (assume semi-annual interest payments and $1,000 pay value)
5.20%
a 7.25 percent coupon bond with 25 years left to maturity is priced to offer a 7 percent yield to maturity. you believe that in one year, the yield to maturity will be 7.15 percent. if. this occurs, what would be the total return of the bond in percent? (assume semi-annual interest payments and $1,000 pay value)
5.3%
a 7.5 percent coupon bond with 16 years left to maturity is offered for sale at $834.92. what yield to maturity is the bond offering? (assume interest payments are semi-annual and par value is $1,000)
9.54%
a 6.75 percent coupon bond with 10 years left to maturity is priced to offer a 6.5 percent yield to maturity. you believe that in one year, the yield to maturity will be 6.65 percent. if. this occurs, what would be the total return of the bond in percent? (assume semi-annual interest payments and $1,000 pay value)
5.5%
what is the taxable equivalent yield on a municipal bond with a yield to maturity of 4% for an investor in the 28% tax bracket?
5.56%
what's the current yield of a 5.75 percent coupon corporate bond quoted at a price of 103.05
5.58%
reconsider a 3.25% TIPS that was issued with CPI reference of 186.7. the bond if purchased at the beginning of the year (after the interest payment), when the CPI was 197.5. for the interest in the middle of the year, the CPI was 201.1 EMCQ. now, at the end of the year, the CPI is 202.4 and the interest payment has been made. what is the total return of the TIPS in percentage terms for the year? (assume semi-annual interest payments and $1,000 pay value)
5.8%
what's the current yield of a 6 percent coupon corporate bond quoted at a price of 101.70
5.9%
a 5.75 percent coupon bond with 12 years left to maturity is offered for sale at $978.83. what yield to maturity is the bond offering? (assume interest payments are semi-annual and par value is $1,000)
6.00%
what's the taxable equivalent yield on a municipal bond with a yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket?
6.00%
a 7.25 percent coupon bond with 25 years left to maturity can be called in 5 years the call premium is one year of coupon payments. it is offered for sale at $1,066.24. what is the yield to call of the bond? (assume interest payments are semi-annual and par value is $1,000)
6.90%
a 4.5 percent coupon bond has 10 years left to maturity and has a price quote of 97.75. the bond can be called in 4 years. the call premium is one year of coupon payments. what is the bond's taxable equivalent yield for an investor in the 33 percent marginal tax bracket? (assume semi-annual interest payments and $5,000 pay value)
7.13%
what's the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket?
7.38%
a bond issued by a corporation on june 15, 2007, is scheduled to mature on june 15, 2017. if today is december 16, 2008, what is the bond's time to maturity? (assume annual interest payments)
8 years, 6 months
what's the current yield of a 8.15 percent coupon corporate bond quoted at a price of 94.30
8.64%
rank the following bonds in order from lowest credit risk to highest risk all with the same time to maturity, by their yield to maturity: JM corporate bond with yield of 12.25 percent, IB corporate bond with yield of 4.49 percent, TC corporate bond with yield of 8.76 percent, and B&O corporate bond with a yield of 5.99 percent
IB bond, B&O bond, TC bond, JM bond
rank from highest credit risk to lowest risk the following bonds, with the same time to maturity, by their yield to maturity: treasury bond with yield of 6.55%, IBM bond with yield of 10.95%, trump casino bond with yield of 9.15%, and banc ono bond with a yield of 9.46%
IBM, Banc Ono, Trump Casino, Treasury
which of the following issues treasury inflation protected securities (TIPS)?
U.S. treasury
which of the following are main issuers of bonds?
U.S. treasury bonds, corporate bonds, municipal bonds all of these
which of the following is NOT a factor that determines the coupon rate of a company's bonds?
all of these are factors that determine the coupon rate of a company's bonds
which of the following is a debt security whose payments originate from other loans, such as credit card debt, auto loans, and home equity loans?
asset-backed securities
which one of these statements is false?
bonds are always less risky than stocks
to compensate the bondholders for getting the bond called, the issuer pays which of the following?
call premium
bonds are issued by which of the following?
corporations, federal government or its agencies, state and local governments all of these
this determines the dollar amount of interest paid to bondholders
coupon rate
which of the following terms is the chance that the bond issuer will not be able to make timely payments?
credit quality risk
which of the following was the catalyst for the recent financial crisis?
defaults on subprime mortagages
compute the price of a 4.75 percent coupon bond with 15 years left to maturity and a market interest rate of 6.25 percent. (assume interest payments are semi-annual and par value is $1,000) Is this a discount or premium bond?
discount
compute the price of a 6 percent coupon bond with 10 years left to maturity and a market interest rate of 8.75 percent. (assume interest payments are semi-annual and par value is $1,000) Is this a discount or premium bond?
discount
which of the following is a true statement?
if interest rates fall, all bonds will enjoy rising values
a corporate bond with a 5.75 percent coupon has 15 years left to maturity. it had a credit rating of BB and a yield to maturity of 6.25 percent. the firm has recently gotten more financially stable and the rating agency is upgrading the bonds to BBB. the new appropriate discount rate will be 6.00 percent. what will be the change in the bond's price in dollars? (assume interest payments are paid semi-annually and a par value of $1,000)
increase $23.72
which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?
indenture
which of the following is not true about EE savings bonds?
interest payments are received annually but are tax deductible
which of the following statements is true?
interest payments paid to municipal bond holders are not taxed at the federal level, or by the state for which the bond is issued
which of the following terms means that during periods when interest rates change substantially, bondholders experience distinct gains and losses in their bond investments?
interest rate risk
which of these statements answers why bonds are known as fixed income securities?
investors know how much they will receive in interest payments
which of the following bonds carry significant risk that the issuer will not make current or future payments?
junk bonds
regarding a bond's characteristics, which of the following is the principal loan amount that the borrower must repay?
par or face value
bond prices are quoted in terms of which of the following?
percent of par value
which of the following terms means the chance that future interest payments will have to be reinvested at a lower interest rate?
reinvestment rate risk
which of the following terms is a comparison of market yields on securities, assuming all characteristics except maturity are the same?
term structure of interest rates
a bond's current yield is defined as
the bond's annual coupon rate divided by the bond's current market price
if zeus energy bonds are upgraded from BBB- to BBB+, which of the following statements is true?
the current bond price will increase and interest rates on new bonds issues will decrease
a client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that offers a 4.10 percent yield. which bond will give the client more profit after taxes?
the municipal bond
a client in the 33 percent marginal tax bracket is comparing a municipal bond that offers a 5 percent yield to maturity and a similar-risk corporate bond that offers a 6.25 percent yield. which bond will give the client more profit after taxes?
the municipal bond
a client in the 35 percent marginal tax bracket is comparing a municipal bond that offers a 4.25 percent yield to maturity and a similar-risk corporate bond that offers a 5.10 percent yield. which bond will give the client more profit after taxes?
the municipal bond
which of the following is an important advantage to the issuer of a bond with a call provision?
they allow for refinancing opportunities
which of the following is a reason municipal bonds offer lower rates of interest income for their investors?
they are tax exempt - at least at the federal level
which of the following is true regarding U.S. government agency securities?
they do not carry the federal government's full faith and credit guarantee
rank from lowest credit risk to highest risk the following bonds, with the same time to maturity, by their yield to maturity: treasury bond with yield of 5.55%, IBM bond with yield of 7.95%, trump casino bond with yield of 9.15%, and banc ono bond with a yield of 6.12%
treasury, banc ono, ibm, trump casino