Reference no: EM13182415
1. A 30 year t-bond issued with a face value of $1,000, paying interest of $30 two times per year. The coupon rates of this bond is ____ %.
a. Increase b. Decrease c. Not Change
2. the market yields increase after issuance. The coupon rate will.a. Increase b. Decrease c. Not change
3. what will happen to the bond's yield to maturity. a. Increase b. Decrease or c. Not Change
4. A 10 year bond has a coupon rate of 5%, a face amount of $1,000, and a yield to maturity of 6%. This bond would sell at:
a. Face amount
b. A premium (above $1,000)
C. A Discount (below $1,000)
d. None of the above
5. A company has 10 year outstanding bonds with a coupon rate of 10%, and a current yield of 9.6%. The yield to maturity is 9.25%. If the company wants to sell a new issue of 10 year bonds, what would the coupon rate need to be for the bonds to sell at their face amount?
a. 10%
b. 9.6%
c. 9.25%
d. Between 9.6% and 10.0%
e. None of the above.
6. A convertible bond is a bond that:
a. That is used to purchase a 1967 Chevy convertible automobile
b. A bond that can be exchanged for a specified number of shares of common stock.
c. A bond whose coupon rate changes as market interest rates change.
d. A bond that actually pays no coupon interest and is sold at a discount.
e. None of the above
7. A 30 year bond with a face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. What is the bond's yield to maturity if the bond is selling for $900? What is the bond's yield to maturity if the bond is selling for $1,000? What is the bond's yield to maturity if the bond is selling for $1,100?
8. Today is January 1, 201A. Suppose that inflation is expected to be 3% during the year 201A, and will fall to 2% in 201B and to 1% in 201C. You may assume that the real rate (pure rate) is 2%. Compute the risk free rate of return for:
a. A one year security issued today,
b. A two year security issued today, and
c. A three year security issued today.
d. Describe the shape of the yield curve.
9. A company issued a 30 year zero coupon bond today for $125. The face amount of the bond is $1,000. What is the implied yield on this bond? Show your calculator steps.
10. Describe the likely economic impact to a company if its bonds are down-rated from AA to A in its annual review from Moody's and S&P.
11. Find the price of a 20 year bond that has a coupon rate of 8%, pays semi-annual interest, and has a $1,000 face amount. The market rate of return on the bond is 6%.
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