Reference no: EM132993435

Problem 1: The yield to maturity on a bond

a) remains fixed over its life.

b) is approximately equal to the return the bond investor will earn if they pay the price and hold the bond to maturity.

c) is the effective yield earned only from coupon payments.

d) is the discount rate that equates the face value of a bond with the present value of all its future cash flows.

Problem 2: A bond that sold for $900 three months ago is selling for $1,000 today. Which of the following must be true?

a) The coupon rate must have increased over the last three months.

b) Interest rates must have increased over the last three months.

c) Interest rates must have decreased over the last three months.

d) The coupon rate must have decreased over the last three months.

The coupon rate must have decreased over the last three months.

Problem 3: The _______ of a bond varies daily as the bonds are bought and sold.

a) face value

b) price

c) coupon rate

d) maturity