完整word版投资学第7版TestBank答案14

1、Chapter 14 Bond Prices and Yields303Multiple Choice Questions1.The current yield on a bond is equal to A) B)C) D)E)annual interest divided by the current market price the yield to maturityannual interest divided by the par value the internal rate of return none of the aboveAnswer: A Difficulty: Easy

2、Rationale: A is current yield and is quoted as such in the financial press.2.If a 7% coupon bond is trading for $975.00, it has a current yield of percent.A)B)C)D)E)7.006.537.248.537.18Answer: E Difficulty: EasyRationale: 70/975 = 7.18.3.If a 6% coupon bond is trading for $950.00, it has a current y

3、ield of percent.A)B)C)D)E)6.06.6Answer: B Difficulty: Easy Rationale: 60/950 = 6.3.4.If an 8% coupon bond is trading for $1025.00, it has a current yield of percent.7.98.1A)B)C)D)E)Answer: A Difficulty: EasyRationale: 80/1025 = 7.8.5.If a 7.5% coupon bond is trading for $1050.00, i

4、t has a current yield of percent.7.06.7A)B)C)D)E)Answer: C Difficulty: EasyRationale: 75/1050 = 7.1.6.A coupon bond pays annual interest, has a par 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 is10.65%10.45

5、%10.95%10.52% none of the aboveA)B)C)D)E)Answer: A Difficulty: ModerateRationale: FV = 1000, n = 4, PMT = 100, i = 12, PV= 939.25; $100 / $939.25 = 10.65%.7.10.39%10.43%10.58%10.66% none of the above8.Of the following four investments, A)B)C)D)E)is considered the mercial paper corporate bo

6、nds U. S. Agency issues Treasury bonds Treasury billsA coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond isA)B)C)D)E)Answer: D Difficulty: ModerateRationale: FV = 1000, n = 12

7、, PMT = 110, i = 12, PV= 938.06; $100 / $938.06 = 10.66%.9.a low times interest earned ratio a low debt to equity ratio a high quick ratioB and CA and CAnswer: E Difficulty: EasyRationale: Only Treasury issues are insured by the U. S. government; the shorter-term the instrument, the safer the instru

8、ment.To earn a high rating from the bond rating agencies, a firm should haveA)B)C)D)E)Answer: D Difficulty: EasyRationale: High values for the times interest and quick ratios and a low debt to equity ratio are desirable indicators of safety.10.above par valuebelow parat or near par valueat a value u

9、nrelated to par none of the aboveAt issue, coupon bonds typically sellA)B)C)D)E)Answer: C Difficulty: Easy11.Accrued interestA)B)C)D)E)is quoted in the bond price in the financial press.must be paid by the buyer of the bond and remitted to the seller of the bond.must be paid to the broker for the in

10、convenience of selling bonds between maturity dates.A and B. A and C.Rationale: If the investment banker has appraised the market and the quality of the bond correctly, the bond will sell at or near par (unless interest rates have changed very dramatically and very quickly around the time of issuanc

11、e).12.the asked price plus accrued interest. the asked price less accrued interest. the bid price plus accrued interest. the bid price less accrued interest. the bid price.Answer: B Difficulty: ModerateRationale: Accrued interest must be paid by the buyer, but is not included in the quotations page

12、price.The invoice price of a bond that a buyer would pay is equal toA)B)C)D)E)Answer: A Difficulty: EasyRationale: The buyer of a bond will buy at the asked price and will also be invoiced for any accrued interest due to the seller.Cha pter 14 Bo nd P rices and Y ields13.An 8% coupon U. S. Treasury

13、note p ays in terest on May 30 and November 30 and is traded for settleme nt on August 15. The accrued in terest on the $100,000 face value of this n ote is.$491.80$800.00$983.61$1,661.20none of the aboveA)B)C)D)E)An swer: D Difficulty: ModerateRati on ale: 76/183($4,000) = $1,661.20. App roximatio

14、n: .08/12*100,000=666.67 per month. 666.67/mo nth * 2.5 mon ths = 1.666.67.14.A coupon bond is rep orted as hav ing an ask p rice of 113% of the $1,000 par value in theWall Street Journal. If the last in terest p ayme nt was made two mon ths ago and the coupon rate is 12%, the inv oice p rice of the

15、 bond will be.$1,100$1,110$1,150$1,160none of the aboveA)B)C)D)E)An swer: C Difficulty: ModerateRatio nale: $1,130 + $20 (accrued in terest) = $1,150.15.the bonds are in suredthe bonds are junk bondsthe bonds are referred to as high yield bonds A and BB and CThe bonds of Ford Motor Company have rece

16、ived a rati ng of D by Moodys. The D rat ing in dicatesA)B)C)D)E)An swer: E Difficulty: EasyRati on ale: D rati ngs are risky bon ds, ofte n called junk bonds (or high yield bonds by those marketi ng such bon ds).309The bond market A) B)C)D)E)16.17.18.positively related. negatively related. sometime

17、s positively and sometimes negatively related. not related.indefinitely related.current yield dividend yield P/E ratio yield to maturity discount yieldcan be quite thin.primarily consists of a network of bond dealers in the over the counter market. consists of many investors on any given day.A and B

18、.B and C.Answer: D Difficulty: EasyRationale: The bond market, unlike the stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers.Ceteris paribus, the price and yield on a bond areA)B)C)E) E)Answer: B Difficulty: EasyRationale: Bond prices and yields are inver

19、sely related.The is a measure of the average rate of return an investor will earn if the investorbuys the bond now and holds until maturity.A)B)C)D)E)Answer: D Difficulty: EasyRationale: The current yield is the annual interest as a percent of current market price; the other choices do not apply to

20、bonds.Cha pter 14 Bo nd P rices and Y ields19.Theexchanged.A)B)C)D)E)gives the nu mber of shares for which each conv ertible bond can beconv ersi on ratio curre nt ratioP/E ratio conv ersi on p remium conv ertible floorAn swer: A Difficulty: EasyRati on ale: The conv ersi on p remium is the amount f

21、or which the bond sells above conv ersi on value; the p rice of bond as a straight bond pro vides the floor. The other terms are not sp ecifically releva nt to conv ertible bon ds.20.A coupon bond is a bond thatA)B)C)D)E)p ays in terest on a regular basis (typ ically every six mon ths)does not pay i

22、n terest on a regular basis but p ays a lump sum at maturity can always be conv erted into a sp ecific nu mber of shares of com mon stock in the issu ing company always sells at par none of the above21.callable coupon put Treasury zero-co uponAn swer: A Difficulty: EasyRati on ale: A coupon bond wil

23、l pay the coupon rate of in terest on a semia nnual basis uni ess the firm defaults on the bond. Conv ertible bonds are sp ecific types of bonds.Abond is a bond where the bon dholder has the right to cash in the bondbefore maturity at a sp ecified p rice after a sp ecific date.A)B)C)D)E)An swer: C D

24、ifficulty: EasyRati on ale: Any bond may be redeemed p rior to maturity, but all bonds other tha n put bonds are redeemed at a p rice determ ined by the p revaili ng in terest rates.22.Callable bonds A) B) C) D)E)are called when interest rates decline appreciably. have a call price that declines as

25、time passes. are called when interest rates increase appreciably. A and B. B and C.Answer: D Difficulty: EasyRationale: Callable bonds often are refunded (called) when interest rates decline appreciably. The call price of the bond (approximately par and one years coupon payment) declines to par as t

26、ime passes and maturity is reached.23.1.0% and 1.2%0.7% and 1.5%1.2% and 1.0%0.8% and 1.3% none of the aboveA Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued b

27、y Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, areA)B)C)D)E)Answer: D Difficulty: ModerateRationale: Shell: 6.5% - 5.7% = .8%; Ford: 7.5% - 6.2% = 1.3%.24.1.6% and 3.3%0.5% and .7%3.3% and 1.6%0.7% and 0.5% none of the

28、aboveA Treasury bond due in one year has a yield of 4.6%; a Treasury bond due in 5 years has a yield of 5.6%. A bond issued by Lucent Technologies due in 5 years has a yield of 8.9%; a bond issued by Mobil due in one year has a yield of 6.2%. The default risk premiums on the bonds issued by Mobil an

29、d Lucent Technologies, respectively, are:A)B)C)D)E)Answer: A Difficulty: ModerateRationale: Mobil: 6.2% - 4.6% = 1.6%; Lucent Technologies: 8.9% - 5.6% = 3.3%.25.1.0% and 1.2%0.5% and .7%1.2% and 1.0%0.7% and 0.5% none of the aboveA Treasury bond due in one year has a yield of 6.2%; a Treasury bond

30、due in 5 years has a yield of 6.7%. A bond issued by Xerox due in 5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued by Exxon and Xerox, respectively, areA)B)C)D)E)Answer: A Difficulty: Moderate26.Floating-rate bonds

31、 are designed to to A)while convertible bonds are designedB)C)D)E)minimize the holders interest rate risk; give the investor the ability to share in the price appreciation of the companys stockmaximize the holders interest rate risk; give the investor the ability to share in the price appreciation o

32、f the companys stockminimize the holders interest rate risk; give the investor the ability to benefit from interest rate changesmaximize the holders interest rate risk; give investor the ability to share in the profits of the issuing company none of the aboveRationale: Exxon: 7.2% - 6.2% = 1.0%; Xer

33、ox: 7. 9% - 6.7% = 1.2%.313Answer: A Difficulty: ModerateRationale: Floating rate bonds allow the investor to earn a rate of interest income tied to current interest rates, thus negating one of the major disadvantages of fixed income investments. Convertible bonds allow the investor to benefit from

34、the appreciation of the stock price, either by converting to stock or holding the bond, which will increase in price as the stock price increases.27.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

35、this bond is:8.0%8.3%9.0%10.0%none of the aboveA)B)C)D)E)Answer: C Difficulty: EasyRationale: When a bond sells at par value, the coupon rate is equal to the yield to maturity.Cha pter 14 Bo nd P rices and Y ields28.A coupon bond that p ays in terest annu ally has a par value of $1,000, matures in 5

36、 years, and has a yield to maturity of 10%. The intrin sic value of the bond today will be$712.99$620.92 $1,123.01$886.28$1,000.00if the coupon rate is 7%.A)B)C)D)E)An swer: D Difficulty: ModerateRatio nale: FV = 1000, PMT = 70, n = 5, i = 10, PV = 886.28.29.A coupon bond that p ays in terest annu a

37、lly, has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrin sic value of the bond today will beif the coupon rate is 12%.A)B)C)D)E)$922.77$924.16$1,075.82$1,077.20none of the aboveAn swer: C Difficulty: ModerateRatio nale: FV = 1000, PMT = 120, n = 5, i = 10, P

38、V = 1075.8230.A coupon bond that p ays in terest semi-a nnu ally has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The in tri nsic value of the bond today will be if the coupon rate is 8%.A)B)C)D)E)$922.78$924.16$1,075.80 $1,077.20 none of the aboveAn swer: A Difficu

39、lty: ModerateRatio nale: FV = 1000, PMT = 40, n = 10, i = 5, PV = 922.78Cha pter 14 Bo nd P rices and Y ields31.A coupon bond that p ays in terest semi-a nnu ally has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrin sic value of the bond today will be if the

40、coupon rate is 12%.A)B)C)D)E)$922.77$924.16$1,075.80$1,077.22none of the aboveAn swer: D Difficulty: ModerateRatio nale: FV = 1000, PMT = 60, n = 10, i = 5, PV = 1077.2232.A coupon bond that p ays in terest of $100 annu ally has a par value of $1,000, matures in 5 years, and is selli ng today at a $

41、72 disco unt from par value. The yield to maturity on this bond is.6.00%8.33%12.00%60.00%none of the aboveA)B)C)D)E)An swer: C Difficulty: ModerateRatio nale: FV = 1000, PMT = 100, n = 5, PV = -928, i = 11.997%33.You pu rchased an annual in terest coupon bond one year ago that now has 6 years rema i

42、ning un til maturity. The coupon rate of in terest was 10% and par value was $1,000. At the time you pu rchased the bond, the yield to maturity was 8%. The amount you p aid for this bond one year ago was$1,057.50.$1,075.50.$1,088.50.$1.092.46.$1,104.13.A)B)C)D)E)An swer: E Difficulty: ModerateRatio

43、nale: FV = 1000, PMT = 100, n = 7, i = 8, PV = 1104.13Chapter 14 Bond Prices and Yields34.You purchased an annual interest coupon bond one year ago that had 6 years remaining to maturity at that time. The coupon interest rate was 10% and the par value was $1,000. At the time you purchased the bond,

44、the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have beenA)B)C)D)E)7.00%7.82%8.00%11.95%none of the aboveAnswer: C Difficulty: Difficul

45、tRationale: FV = 1000, PMT = 100, n = 6, i = 8, PV = 1092.46; FV = 1000, PMT = 100, n = 5, i = 8, PV = 1079.85; HPR = (1079.85 - 1092.46 + 100) / 1092.46 = 8%35.both bonds will increase in value, but bond A will increase more than bond B both bonds will increase in value, but bond B will increase mo

46、re than bond A both bonds will decrease in value, but bond A will decrease more than bond B both bonds will decrease in value, but bond B will decrease more than bond A none of the aboveConsider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of

47、$120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 10%, .A)B)C)D)E)Answer: B Difficulty: ModerateRationale: The longer the maturity, the greater the price change when interest rates change.36.A zero-coupon b

48、ond has a yield to maturity of 9% and a par value of $1,000. If the bond matures in 8 years, the bond should sell for a price of today.422.41$501.87$513.16$483.49none of the aboveA)B)C)D)E)Answer: B Difficulty: ModerateRationale: $1,000/(1.09)8 = $501.8737.You have just purchased a 10-year zero-coup

49、on 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.10.00%20.42%13.8%1.4%none of the aboveA)B)C)D)E)Answer: D Difficulty: ModerateRationa

50、le: $1,000/(1.10)10 = $385.54; $1,000/(1.11)9 = $390.92; ($390.92 - $385.54)/$385.54 = 1.4%.38.A Treasury bill with a par value of $100,000 due one month from now is selling today for $99,010. The effective annual yield is .12.40%12.55%12.62%12.68%none of the aboveA)B)C)D)E)Answer: D Difficulty: Mod

51、erateRationale: $990/$99,010 = 0.01; (1.011)2 - 1.0 = 12.68%.39.12.40%12.55%12.62%12.68% none of the aboveA Treasury bill with a par value of $100,000 due two months from now is selling today for $98,039, with an effective annual yield of .A)B)C)D)E)Answer: C Difficulty: ModerateRationale: $1,961/$9

52、8,039 = 0.02; (1.026) - 1 = 12.62%.2.40%12.55%12.62%12.68% none of the aboveA Treasury bill with a par value of $100,000 due three months from now is selling today for $97,087, with an effective annual yield of .A)B)C)D)E)Answer: B Difficulty: ModerateRationale: $2,913/$97,087 = 0.03; (1.0

53、34) - 1.00 = 12.55%.$922.77$924.16$1,075.80$1,077.20 none of the aboveA coupon bond pays interest semi-annually, matures in 5 years, has a par value of$1,000 and a coupon rate of 12%, and an effective annual yield to maturity of 10.25%. The price the bond should sell for today is .A)B)C)D)E)Answer:

54、D Difficulty: ModerateRationale: (1.1025)1/2 - 1 = 5%, N=10, I=5%, PMT=60, FV=1000, PV=1,077.22.$729$810$870$1,000none of the aboveA convertible bond has a par value of $1,000 and a current market price of $850. The current price of the issuing firms stock is $29 and the conversion ratio is 30 share

55、s. The bonds market conversion value is .A)B)C)D)E)Answer: C Difficulty: EasyRationale: 30 shares X $29/share = $870.317Cha pter 14 Bo nd P rices and Y ields43. A convertible bond has a par value of $1,000 and a current market value of $850. The curre nt p rice of the issu ing firms stock is $27 and the con versi on ratio