All else being equal, an investment with a higher level of risk will have a lower value and/or a higher return than a less risky investment.Select one:TrueFalseQuestion 2Not yet answeredMarked out of 1.00Flag questionQuestion textAll of the following may serve to lower the risk and therefore reduce the coupon rate that would otherwise be require on a bond EXCEPT a…Select one:A. restrictive covenantB. call provisionC. change in the rating from Aa to AaaD. none of the above (all would reduce the required coupon rate)Question 3Not yet answeredMarked out of 1.00Flag questionQuestion textA 15-year bond with a face value of $1,000 currently sells for $850. Which of the following statements is most correct?Select one:A. the bond?s yield to maturity is greater that its coupon rateB. if the yield to maturity stays constant until the bond matures, its price will also remain at $850 until the bond maturesC. the bond?s current yield is equal to the bond?s coupon rateD. statements 2 and 3 are correctQuestion 4Not yet answeredMarked out of 1.00Flag questionQuestion textYou intend to purchase a 10-year, $1,000 face value bond that pays interest of $60 every 6 months or $120 per year. If your required rate of return is 10 percent, how much should you pay for this bond?Select one:A. $ 826.31B. $ 957.50C. $1,086.15D. $1,124.62Question 5Not yet answeredMarked out of 1.00Flag questionQuestion textA $1,000 par value bond has an 8% coupon and pays interest annually. There are 9 years remaining until maturity. The market rate for this and similar bonds is 10%. What is the CURRENT YIELD on this bond?Select one:A. 8.00%B. 8.84%C. 9.04%D. 10.00%Question 6Not yet answeredMarked out of 1.00Flag questionQuestion textThe current price of a 10-year, $1,000 par value bond is $1,156.50. Interest on this bond is paid annually, and the yield is 14 percent. What is the annual coupon payment on this bond?Select one:A. $210B. $170C. $140D. $115Question 7Not yet answeredMarked out of 1.00Flag questionQuestion textOne of the outside articles in this week?s packet talked about the relationship between the way Virginia Tech handled the mass shooting on it?s campus and it?s bond rating. Which of the following is true according to the article?Select one:A. Moody’s Investors Service increased bond ratingB. Moody’s Investors Service affirmed V-Tech?s high bond ratingC. Moody’s Investors Service lowered V-Tech?s bond ratingD. None of the above statements are trueQuestion 8Not yet answeredMarked out of 1.00Flag questionQuestion textA 25-year bond with a par value of $1,000 sells for $990.92. The current market interest rate is 10%. How much coupon interest does the bond pay?Select one:A. $119.34B. $98.99C. $247.45D. $100.00Question 9Not yet answeredMarked out of 1.00Flag questionQuestion textYou wish to buy a 10-year, $1,000 face value bond with a 6% coupon that pays interest semi-annually. If your required rate of return is 10%, how much would you be willing to pay for this bond?Select one:A. $404.05B. $845.56C. $750.76D. $1,124.62Question 10Not yet answeredMarked out of 1.00Flag questionQuestion textThe longer the time until a bond?s maturity?Select one:A. the greater the price increase from an increase in interest rates.B. the less the price increase from an increase in interest rates.C. the greater the price increase from a decrease in interest rates.D. the less the price decrease from a decrease in interest rates.Question 11Not yet answeredMarked out of 1.00Flag questionQuestion textYou want to invest in corporate bonds but also want to restrict your interest rate risk and default risk associated with such an investment. Which of the following will best meet your investment criteria?Select one:A. Aaa bond with 10 years to maturity.B. Baa bond with10 years to maturity.C. Aaa bond with 5 years to maturity.D. Baa bond with 5 years to maturity.Question 12Not yet answeredMarked out of 1.00Flag questionQuestion textA 10-year bond with a $1,000 par value currently sells for $1,200. The market rate for similar bonds is 12%. How much interest does the bond pay each year?Select one:A. $155B. $120C. $100D. Not enough information to tellQuestion 13Not yet answeredMarked out of 1.00Flag questionQuestion textA call provision gives bondholders the right to demand, or ?call for,? repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal amount back and reinvest it elsewhere at higher rates.Select one:TrueFalseQuestion 14Not yet answeredMarked out of 1.00Flag questionQuestion textWhen interest rates increase the price of a bond decreases.Select one:TrueFalseQuestion 15Not yet answeredMarked out of 1.00Flag questionQuestion textA highly rated bond (AAA for example) will pay more interest than a lower rated bondSelect one:TrueFalse

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