Which of the following is NOT the amount that is originally borrowed or the amount that is repaid when the bond mature is due?
a.) Indenture
b.) Par value
c.) Principal amount
d.) Maturity value
e.) Face value
a.) Indenture
Assume that a 10-year semi-annual, 9% bond is callable after 5 years at 105% of par value and the discount rate in today's market is 5%. Using the price-to-worst method, what is the value of this bond?
a.) $1,000
b.) $1,149
c.) $1,214
d.) $1,223
e.) $1,01
c.) $1,214
Which of the following is TRUE concerning the interest rate risk while investing in fixed-coupon debt obligations?
a.) The higher the coupon on a bond, the higher the volatility of bond prices, the greater the interest rate risk
b.) Interest rate risk is
e.) Fluctuations in market levels of interest rates would affect the price a bond.
Which of the following scenario's is most likely to result in a bond being called?
a.) 20-year bond with 2 remaining 8% coupon payments in a 7% interest rate environment
b.) 10-year bond with 18 remaining 8% coupon payments in a 8% interest rate environme
d.) 10-year bond with 18 remaining 8% coupon payments in a 6% interest rate environment
Which of the following is TRUE regarding fixed rate premium bonds?
a.) The bond's coupon rate is lower than the yield that it offers.
b.) The bond's coupon rate is higher than the yield that it offers.
c.) The bond's coupon rate is equal to the yield that
b.) The bond's coupon rate is higher than the yield that it offers.
Value a 15-yr semi-annual, non-callable bond that pays coupons of 8% assuming market interest rates are 8%.
a.) $1,200
b.) $1,182
c.) $1,000
d.) $752
e.) $1,092
c.) $1,000
Which of the following is true about bonds?
a.) The bond rating being changed from BBB+ to B would result in a lower required yield
b.) The primary advantage to municipal bonds is that interest income received is not taxed by the federal government
c.) In
b.) The primary advantage to municipal bonds is that interest income received is not taxed by the federal government
Which of the below is NOT correct about risks of fixed-coupon debt obligations?
a.) Default risk is considered a type of risk involved when investing in fixed-coupon debt obligations
b.) Reinvestment risk is considered a type of risk involved when investi
e.) There is no risk involved when investing in fixed-coupon debt obligations
According to the Random Walk Hypothesis, in efficient markets, ________.
a.) There are predictable stock trends in efficient markets based on past performance.
b.) Technical Analysis is a valid method to determine future stock prices.
c.) Share prices rea
c.) Share prices react immediately to news and share price changes are random.
Which of the following is the risk that changes in market rates will affect the value of a bond?
a.) Default risk
b.) Reinvestment risk
c.) Prepayment risk
d.) Interest rate risk
e.) Systematic risk
d.) Interest rate risk
Which of the following is definitely true when interest rates are lower than a bond's coupon rate?
a.) Bond will sell at a premium
b.) Bond will see at a discount
c.) Bond will sell at par
d.) Coupon rate will be decreased to current interest rate
e.) Pri
a.) Bond will sell at a premium
Given the following information, calculate the present value of the following bond that pays semi-annual coupons. Par value: $1,000. Coupon Rate: 9%. Interest Rate: 13%. Maturity: 5 years.
a.) $678
b.) $1,000
c.) $1,346
d.) $856
e.) $806
d.) $856
Which of the following is true of bonds?
a.) Bonds are an equity investment.
b.) Bonds repay the principal to the investor in semi-annual payments only.
c.) Bonds don't have default risk.
d.) Bonds are only issued by governments and municipalities.
e.) Bo
e.) Bonds pay principal at maturity.
Which of the following is true concerning the duration of a bond?
a.) Duration is the same as the time until the bond is callable by the issuer.
b.) The higher the coupon payment on a bond, the longer the duration.
c.) Duration is a measure of the price v
e.) A longer duration signifies a higher level of interest rate risk.
An upward sloping yield curve means that:
a.) Investors require lower returns for longer maturity Treasuries.
b.) Investors require higher returns for longer maturity Treasuries.
c.) Investors require higher returns for shorter maturity Treasuries.
d.) In
b.) Investors require higher returns for longer maturity Treasuries.
Which of the following is NOT a risk associated with bonds?
a.) Default Risk
b.) Reinvestment Risk
c.) Prepayment Risk
d.) Interest Rate Risk
e.) Ratings Upgrade Risk
e.) Ratings Upgrade Risk
Which of the following is true concerning the interest rate risk of bonds?
a.) The longer the maturity of a bond, the higher the interest rate risk of that bond
b.) The higher the coupon of a bond, the higher the interest rate risk of that bond
c.) The sh
a.) The longer the maturity of a bond, the higher the interest rate risk of that bond
If you bought a stock for $250 and sold it for $300 after a year, you also received a dividend of $20 in that year. What was the RETURN you received over the year?
a.) 12.4%
b.) 28.0%
c.) 19.6%
d.) 14.0%
e.) 13.6%
b.) 28.0%
Calculate value of a perpetuity with even annual cash flows of $20,000 with 8% discount rate.
a.) $210,000
b.) $250,000
c.) $211,664
d.) $108,000
e.) $233,280
b.) $250,000
According to _________________, the yield curve represents a series of expected future short-term interest rates.
a.) pure expectations hypothesis
b.) the liquidity preference theory
c.) the market segmentation hypothesis
d.) the random walk theory
e.) th
a.) pure expectations hypothesis
What is true about the excess return period?
a.) It refers to the period in which a firm is able to earn returns on new investments that are lower than its cost of capital due to competitive advantage of the firm over others
b.) The higher the competition
b.) The higher the competition in the industry the lower the excess return period
Which of the following is true about technical analysis?
a.) It generally involves holding stock for a long period of time
b.) It involves charting historic stock price movements and trading volumes
c.) It is possible to beat the market with technical ana
b.) It involves charting historic stock price movements and trading volumes
Which of the following is true about the dividend policy of a company?
a.) The dividend policy of a company should affect the future value of a stock but not the current value
b.) Companies with low excess return periods typically pay lower dividends
c.)
a.) The dividend policy of a company should affect the future value of a stock but not the current value
A callable bond:
a.) would usually have a lower yield than a similar non-callable bond.
b.) is attractive to the buyer because the immediate receipt of principal and premium usually produces a higher return.
c.) is more apt to be called when interest rate
e.) is attractive to the issuer because it allows the issuer to prepay outstanding debt if new debt can be issued at lower rates.
Under which scenario is an issuer LEAST likely to call their bonds?
a.) Bond prices go up
b.) The issuer's credit rating improves
c.) The issuer's credit rating deteriorates
d.) Interest rates remain the same
e.) The company's cash reserve increases
c.) The issuer's credit rating deteriorates
The amount that is originally borrowed or the amount that is repaid when the bond mature is due is known as ___________.
a.) Indenture
b.) Par value
c.) Annual amount
d.) Interest
e.) Semi-annual amount
b.) Par value
Assume that a 15-year semi-annual, 8% bond is callable after 10 years at 105% of par value and the discount rate in today's market is 6%. Using the price-to-worst method, what is the value of this bond?
a.) $1,209
b.) $1,176
c.) $1,314
d.) $1,000
e.) $1,0
b.) $1,176
Which of the following is true about bonds?
a.) The bond rating being changed from BBB+ to A would result in a higher required yield
b.) The primary advantage to municipal bonds is lower reinvestment risk
c.) Callable bonds require higher yields than non-
e.) The issuer retains interest rate risk on floating rate bonds
Which of the following is the risk that income earned and reinvested from a bond's coupon payments will earn a different rate of return?
a.) Default risk
B.) Reinvestment risk
c.) Prepayment risk
d.) Interest rate risk
e.)Systematic risk
B.) Reinvestment risk
Which of the following is definitely true when interest rates are higher than a bond's coupon rate?
a.) Bond will sell at a premium
b.) Bond will sell at a discount
c.) Bond will sell at par
d.) Coupon rate will be increased to current interest rate
e.0 P
b.) Bond will sell at a discount
Given the following information, calculate the present value of the following bond that pays semi-annual coupons. Par value: $1,000. Coupon Rate: 7%. Interest Rate: 9%. Maturity: 5 years.
a.) $1,149
b.) $804
c.) $864
d.) $1,000
e.) $921
e.) $921
Which of the following is true of bonds?
a.) Bonds are an equity instrument.
b.) Bonds repay the principal to the investor in semi-annual payments only.
c.) Bonds have default risk.
d.) Bonds are only issued by governments and municipalities.
e.) Bonds is
c.) Bonds have default risk.
A downward sloping yield curve means that:
a.) Investors require lower returns for shorter maturity Treasuries.
b.) Investors require higher returns for longer maturity Treasuries.
c.) Investors expect interest rates to decline.
d.) Investors require the
c.) Investors expect interest rates to decline.
Which of the following is a risk associated with bonds?
a.) Low Principal Risk
b.) Zero coupon Risk
c.) Ratings Upgrade Risk
d.) Default Risk
e.) Stock Market Risk
d.) Default Risk
Which of the following is true concerning the interest rate risk of bonds?
a.) The higher the coupon of a bond, the higher the interest rate risk of that bond
b.) The shorter the maturity of a bond, the higher the interest rate risk of that bond
c.) The l
e.) The lower the coupon of a bond, the higher the interest rate risk of that bond
According to ______________, stock prices react instantaneously, completely and accurately to all publicly available information.
a.) pure expectations hypothesis
b.) the liquidity preference theory
c.) the market segmentation hypothesis
d.) the random wa
e.) the efficient markets hypothesis
What is true about the excess return period?
Correct!
a.) It is the period in which a firm is able to earn returns on new investments that are greater than its cost of capital due to competitive advantage of the firm over others
b.) A higher cost of capit
a.) It is the period in which a firm is able to earn returns on new investments that are greater than its cost of capital due to competitive advantage of the firm over others
Which of the following is true about technical analysis?
a.) It generally involves holding stock for a long period of time
b.) it involves charting historic stock price movements and trading volumes
c.) It is possible to beat the market with technical ana
b.) it involves charting historic stock price movements and trading volumes
Which of the following is true about the dividend policy of a company?
a.) The dividend policy of a company should affect the future value of a stock but not the current value
b.) Companies with low excess return periods typically pay lower dividends
c.)
a.) The dividend policy of a company should affect the future value of a stock but not the current value
Which is true about callable bonds when compared to similar non-callable bonds?
a.) Callable bonds generally have higher credit ratings than similar non-callable bonds.
b.) Callable bonds generally have lower yields.
c.) Callable bonds usually have higher
c.) Callable bonds usually have higher yields
Under which scenario is an issuer MOST likely to call their bonds?
a.) Bond prices go down
b.) The issuer's credit rating improves
c.) The issuer's credit rating deteriorates
d.) Interest rates remain the same
e.) The company faces a liquidity crisis
b.) The issuer's credit rating improves