Reference no: EM13796566
1. The following entities issue bonds to engage in long-term borrowing EXCEPT:
a. the federal government
b. state and local governments
c. corporations
d. individuals
2. If a bond pays interest semiannually, then it pays interest:
a. once per year
b. every six months
c. every three months
d. every two years
3. A five-year treasury bond with a coupon rate of 8% has a face value of $1,000. What is the semiannual interest payment?
a. $80
b. $40
c. $100
d. $50
4. A three-year bond has an 8.0% coupon rate and a $1,000 face value. If the yield to maturity on the bond is 10.0%, calculate the price of the bond assuming that the bond makes semiannual coupon payments.
a. $857.96
b. $949.24
c. $1,057.54
d. $1,000.00
5. A four-year bond has an 8% coupon rate and a face value of $1,000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).
a. 8%
b. 10%
c. 12%
d. 6%
6. A five-year bond with a 10% coupon rate and $1,000 face value is selling for $1,123. Calculate the yield to maturity on the bond assuming annual interest payments.
a. 10.0%
b. 8.9%
c. 7.0%
d. 5.0%
7. Which of the following statements about the relationship between interest rates and bond prices is true?
I) There is an inverse relationship between bond prices and interest rates.
II) There is a direct relationship between bond prices and interest rates.
III) The price of short-term bonds fluctuates more than the price of long-term bonds for a given
change in interest rates (assuming that the coupon rate is the same for both).
IV) The price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
a. I and IV only
b. I and III only
c. II and III only
d. II and IV only
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