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Exam 7: Interest Rates and Bond Valuation

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Question 71

Multiple Choice

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Which of the following defines a note? I. secured II. unsecured III. maturity less than 10 years IV. maturity in excess of 10 years

A) III only
B) I and III only
C) I and IV only
D) II and III only
E) II and IV only

F) B) and D)
G) A) and D)

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Question 72

Multiple Choice

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A corporate bond was quoted yesterday at 102.16 while today's quote is 102.19. What is the change in the value of a bond that has a face value of $6,000?

A) $0.30
B) $1.80
C) $3.00
D) $18.00
E) $180.00

F) A) and E)
G) B) and E)

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Question 73

Multiple Choice

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You purchased an investment which will pay you $8,000, in real dollars, a year for the next three years. Each payment will be received at the end of the period with the first payment occurring one year from today. The nominal discount rate is 7.5 percent and the inflation rate is 2.9 percent. What is the present value of these payments?

Today, June 15, you want to buy a bond with a quoted price of 98.64. The bond pays interest on January 1 and July 1. Which one of the following prices represents your total cost of purchasing this bond today?

A Treasury yield curve plots Treasury interest rates relative to which one of the following?

Phil has researched TLM Technologies and believes the firm is poised to vastly increase in value. He wants to invest in this company. Phil has decided to purchase TLM Technologies bonds so that he can have a steady stream of interest income. However, he still wishes that he could share in the firm's success along with TLM's shareholders. Which one of the following bond features will help Phil fulfill his wish?

An 8 percent corporate bond that pays interest semi-annually was issued last year. Which two of the following most likely apply to this bond today if the current yield-to-maturity is 7 percent? I. a structure as an interest-only loan II. a current yield that equals the coupon rate III. a yield-to-maturity equal to the coupon rate IV. a market price that differs from the face value

A Treasury bond is quoted at a price of 105: 15. What is the market price of this bond if the face value is $5,000?