Reference no: EM132402923

1. Which of the following two bonds is more price sensitive to changes in interest rates? (requires calculations)

A. A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate.

B. A zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity.

C. Bond X because of the higher yield to maturity.

D. Bond X because of the longer time to maturity.

E. Bond Y because of the longer duration.

F. Both have the same sensitivity because both have the same yield to maturity.

G. None of the above

2. Which one of the following par value 12% coupon bonds experiences a price change of $23 when the market yield changes by 50 basis points? (requires calculations)

A. The bond with a duration of 6 years.

B. The bond with a duration of 5 years.

C. The bond with a duration of 2.7 years.

D. The bond with a duration of 5.15 years.

E. None of the above.

3. The duration of a perpetuity with a yield of 8% is (requires calculations)

A. 13.50 years.

B. 12.11 years.

C. 6.66 years.

D. cannot be determined.

E. none of the above.

4. A coupon bond pays annual interest, has a face value of $1,000, matures in 4 years, has a coupon rate of 10%, and has a yield to maturity of 12%. The current yield on this bond is ___________. (requires calculations)

A) 10.65%

B) 10.45%

C) 10.95%

D) 10.52%

E) none of the above

5. A coupon bond that pays interest annually is selling at par value of $1,000, matures in 5 years, and has a coupon rate of 9%. The yield to maturity on this bond is:

A) 8.0%

B) 8.3%

C) 9.0%

D) 10.0%

E) none of the above

6. You have just purchased a 10-year zero-coupon bond with a yield to maturity of 10% and a par value of $1,000. What would your rate of return at the end of the year be if you sell the bond? Assume the yield to maturity on the bond is 11% at the time you sell. (requires calculations)

A) 10.00%

B) 20.42%

C) 13.8%

D) 1.4%

E) none of the above