Objective type questions on bond investment and interest

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Reference no: EM1314405

Objective type questions on Bond investment and interest rates

1. In inflations is expected to decrease in the future, the graph depicting the term structure of interest rates will be-

Upward-slopping
flat
humped
downward-slopping
double-humped

2. Which one of the following rates is the best measure of the increased purchasing power you can realize from a bond investment?

current yield
nominal rate
real rate
yield to maturity
yield to call

3. Which one of the following bonds tends to be the most interest rate sensitive?

20-year, zero coupon bond
a 20-year, 9 percent coupon bond
a 5-year, zero coupon bond
a 1-year, zero coupon bond
a 1-year, 9 percent coupon bond

4. An interest rate that has been adjusted for inflation is called a _______ rat

deflated
coupon
nominal
real
premium

5. A deep discount bond that pays no regular interest payment is called a(an) _______ bon

exotic
income
zero coupon
convertible
put

6. Candy and Cookies pays a constant annual dividend of $1.30 per shar How much are you willing to pay for one share if you require a 12 percent rate of return?

$9.2
$10.8
$12.1
$13.5
$15.6

7. Winslow and Daughters just paid their annual dividend of $2.2 a share. They recently announced that all future dividends will increase by 2 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return?

$18.27
$18.33
$18.14
$18.70
$18.87

8. The common stock of Wetmore Industries in valued at $10.08 a share. The company increases their dividend by 3.5 percent annually and expects their next dividend to be $1.24. What is the required rate of return on this stock?

15.8
16.23
16.35
16.49
16.53

9. A stock pays a $.80 dividend and has a market price of $20.40 a share. What is the dividend yield?

1.63
1.96
2.14
3.26
3.92

10. A preferred stock sells for $66.08 a share and has a market return of 11.35%. What is the dividend amount?

$5.82
$6.17
$6.40
$7.25
$7.50

Reference no: EM1314405

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