# finance 6

 the coupon rate of a bond equals:a. its yield to maturity b. a percentage of its price c. the maturity value d. a percentage of the par value d. a percentage of the par value periodic receipts of interest by the bondholder are known as:a. the coupon rate b. a zero-coupon c. coupon payments d. the default premium c. coupon payments which of the following presents the correct relationship? As the coupon rate of a bond increases, the bond’s:a. face value increases b. current price decreasesc. interest payments increase d. maturity date is extended c. interest payments increase what happens when a bonds expected cash flows are discounted at a rate lower than the bonds coupon rate?a. the price of the bond increases b. the coupon rate of the bond increases c. the par value of the bond decreasesd. the coupon payments will be adjusted to the new discount rate a. the price of the bond increases the face value of a bond is received by the bondholder:a. at the time of purchase b. annuallyc. whenever coupon payments are maded. at maturity d. at maturity which of the following statements is correct for a 10% coupon bond that has a current yield of 13%?a. the face value of the bond is decreased b. the bonds maturity value exceeds the bonds price c. the bonds internal rate of return is 13%d. the bond has few years remaining until maturity b. the bonds maturity value exceeds the bonds price if an investor purchases a bond when its current yield is less than the coupon rate, then the bonds price will be expected to:a. decline over time, reaching per value at maturity b. increase over time, reaching par value at maturity c. be less than the face value at maturityd. exceed the face value at maturity a. decline over time, reaching par value at maturity the current yield of a bond can be calculated by:a. multiplying the price by the coupon rate b. dividing the price by the annual coupon payments c dividing the price by the par value d. dividing the annual coupon payments by the price d. dividing the annual coupon payments by the price what is the current yield of a bond with a 6% coupon, four years until maturity, and a price of \$750?a. 6%b. 8%c. 12%d. 14.7% b. 8% a bond’s face value can also be called its:a. coupon payment b. present valuec. default valued. par value d. par value a bonds yield to maturity takes into consideration:a. current yield but not price changes of a bond b. price changes but not current yeild of a bond c. both current yeild and price changes of a bond d. neither current yield nor price changes of a bond c. both current yield and price changes of a bond the discount rate that makes the present value of a bond’s payments equal to its price is termed the:a. rate of return b. yield to maturity c. current yield d. coupon rate b. yield to maturity what is the coupon rate, for a bond with 3 years until maturity, a price of \$1053.46, and a yield to maturity of 6%?a. 6% b. 8%c. 10%d. 11% b. 8% which of the following factors will change when interest rates change?a. the expected cash flows from a bond b. the present value of a bonds payments c. the coupon payment of a bond d. the maturity value of a bond b. the present value of a bonds paymnets what happens to the coupon rate of a bond that pays \$80 annually in interest if interest changes from 9% to 10%?a. the coupon rate increase to 10% b. the coupon rate remains at 9%c. the coupon rate remains at 8%d. the coupon rate decreases to 8% c. the coupon rate remains at 8% which of the following is fixed (cannot change) for the life of a given bond?a. current price b. current yield c. yield to maturity d. coupon payment d. coupon payment which of the following is correct when a bond investors rate of return for a particular period exceeds the bonds coupon rate?a. the bond increased in price during the period b. the bond decreased in price during the period c. the coupon payment increased during the period d. it is not possible for a bondholders rate of return to exceed the bonds coupon rate a. the bond increased in price during the period what is the realtionship between an investment an investments rate of return and its yield to maturity for an investor that does not hold a bond until maturity?a. rate of return is lower than yeild to maturity b. rate of return is higher than yeiled to maturity c. rate of return equals yield to maturity d. there is no predetermined relationship d. there is no predetermined relationship if the coupon rate is lower than current interest rates, then the yield to maturity will be:a. lower than current interest ratesb. equal to the coupon ratec. higher than the coupon rated. lower than the coupon rate b. equal to the coupon rate How does a bond dealer generate profits when trading bonds?a. by maintaining bid prices lower than ask prices b. by maintaining bid prices higher than ask prices c. by retaining the bonds next coupon payment d. by lowering the bonds coupon rate a. by maintaining bid prices lower than ask prices which of the following is correct for a bond priced at \$1100 that has 10 years remaining until maturity, and a 10% coupon, with semi-annual payments?a. each payment of interest equals \$50b. each payment of interest equals \$55 c. each payment of interest equals \$100 d. each payment of interest equals \$110 a. each payment of interest equals \$50 the yield curve depicts the current relationship between:a. bond yields and default risk b. bond maturity and bond ratings c. bond yields and maturity d. promised yields and default premiums c. bond yields and maturity when the yield curve is upward-sloping then:a. short-maturity bonds offer high coupon rates b. long-maturity bonds are priced above par value c. short maturity bonds yield less than long maturity bonds d. long maturity bonds increase in price when interest rates increase c. short maturity bonds yield less than long maturity bonds Canada bond yields do not contain a:a. coupon interest payment b. nominal interest ratec. default premium d. yield to maturity c. default premium when riskier corporations issue bonds that include a default premium, the promised yield will sometimes be:a. less than the actual yield b. greater than the actual yield c. less than the yield on a default-free bond d. greater than the face value of the bond b. greater than the actual yield the purpose of a floating-rate bond is to:a. save interest expense for corporate issuers b. avoid making interest payments until maturity c. shift the yield curved. offer rates adjusted to current market conditions d. offer rates adjusted to current market conditions which of the following would not be associated with a zero coupon bond?a. yield to maturityb. discount bond c. current yieldd. interest rate risk c. current yield which of the following bonds would be likely to exhibit a greater degree of interest-rate risk?a. a coupon-paying bond with 5 years until maturity b. a coupon-paying bond with 20 years until maturity C. a floating-rate bond with 20 years until maturity d. a zero coupon bond with 30 years until maturity d. a zero coupon bond with 30 years until maturity where does a “convertible bond” get its name?a. the option of converting into shares of common stock b. the option of increasing its coupon payments when interest rates increase c. the option of converting the zero-coupon to coupon paying bond d. the option of increasing yielding without decreasing price a. the option of converting into shares of common stock which one of the following identifies the distinction between a Canada bond and a corporate bond?a. canada bonds make coupon payments; corporate bonds do notb. corporate bonds have default risk, canada bonds do notc. corporate bonds have longer terms d. canada bonds have higher yeilds b. corporate bonds have default risk; canada bonds do not which of the following is correct for a bond currently selling at a premium to par?a. its current yield is higher than its coupon rate b. its current yield is lower than its coupon rate c. its yield to maturity is higher than its coupon rate d. its default risk is extremely low b. its current yield is lower than its coupon rate Capital losses will automatically be the case for bond investors who buy:a. discount bonds b. premium bonds c. zero coupon bonds d. junk bonds b. premium bonds investors who own bonds having lower credit ratings should expect:a. lower yields to maturity b. higher default possibilities c. lower coupon payments d. higher present value of cash flows b. higher default possibilities if a bond is priced at par value, then:a. it has a very low level of default risk b. its coupon rate equals its yield to maturity c. it must be a zero coupon bond d. the bond is quite close to maturity b. its coupon rate equals its yield to maturity the existence of an upward-sloping yield curve suggests that:a. bonds should be selling at a discount at par value b. bonds will not return as much as common stocks c. interest rates will be increasing in the future d. real interest rates will be increasing soon c. interest rates will be increasing in the future which one of the following will not happen for an investor who owns a Canada bond during a period of inflation?a. the coupon payment will increase in nominal terms b. the maturity value will remain constant in nominal terms c. the investors capital gain will rise d. the bond price will fall a. the coupon payment will increase in nominal terms which of the following is correct for a bond investor whose bond offers a 5% current yield and an 8% yield to maturity?a. the bond is selling at a discount to par value b. the bond has a high default premium c. the promised yield is not likely to materialize d. the security must be a Canada bond a. the bond is selling at a discount to par value Assume that a bond has been owned by 4 different investors during its 20 year history. Which of the following is not likely to have been shared by these different owners?a. coupon rate b. cash flows c. par value d. yield to maturity d. yield to maturity Which of the following is correct concerning real interest rates?a. real interest rates are constant b. real interest rates must be positive c. real interest rates must be less than nominal interest rates d. real interest rates, if positive, indicate increased purchasing power d. real interest rates, if positive, indicate increased purchasing power Which of the following will reduce the yield to maturity from what the investor calculated at time of purchase?a. increasing interest rates; bonds held to maturity b. decreasing interest rates; bonds held to maturity c. stable interest rates; bonds sold before maturity d. increasing interest rates; bonds sold before maturity d. increasing interest rates; bonds sold before maturity When market interest rates exceed a bonds coupon rate, the bond will:a. sell for less than par value b. sell for more than par value c. decrease its coupon rate d. increase its coupon rate b. sell for more than par value Which of the following is likely to be correct for a CCC-related bond, compared to a BBB-related bond?a. the CCC bond will sell for a higher price b. the CCC bond will sell for a lower price c. the CCC bond will offer a higher promised yield to maturity d. the CCC bond will offer a lower promised yield to maturity c. the CCC bond will offer a higher promised yield to maturity What causes bonds to sell for premium compared to face value?a. the bonds have high ratings b. the bonds have a long period until maturity c. the bonds have a higher than market coupon rate d. the bonds are of sepculative grade c. the bonds have a higher than market coupon rate the current yield tends to overstate a bonds total return when the bond sells for a premium because:a. the bonds price will decline each year b. coupon payments can change at any time c. bonds selling for a premium have low default risk d. taxes must be paid on the current yield a. the bonds price will decline each year the current yield tends to understate a bonds total return when the bond sells for a discount because:a. increases in interest rates will increase the current yield b. the bonds price will increase each year c. current yields only show nominal returns d. the bond may have a higher face value a. increases in interest rates will increase the current yield the value of a callable bond:a. is unlimited b. is limiteed by its face valuec. is limited by its call price d. is limited by high interest rates c. is limited by its call price a bond is currently trading at par, has an annual coupon of \$100, and matures at a face value of \$100. Therefore, the _____ is 10%.a. coupon rate b. current yield c. yield to maturity d. all of the above terms d. all of the above terms
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