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Exam 11: Bond Prices and Yields

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Question 61

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A bond with 11 years to maturity and a 6 percent coupon rate, a $1,000 face value, has a yield to maturity of 7.1 percent. What is the current price of the bond? The bond pays interest semiannually.

A) $952.34
B) $859.90
C) $843.21
D) $873.83
E) $916.99

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Question 62

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A bond with a face value of $1,000 has annual coupon payments of $100 and was issued 12 years ago. The bond currently sells for $1,000 and has 8 years left to maturity. This bond's _________ must be 10%. I. Yield to maturity. II) Current yield. III) Coupon rate

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

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Question 63

Multiple Choice

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The dirty price of a bond is the

The price paid to redeem a bond prior to maturity is the

Which of the following will affect a bond's Macaulay duration? I. The current yield to maturity. II. The coupon rate. III. The maturity.

Which of the following will increase if the coupon rate increases? I. face value II. market value III. yield-to-maturity IV. current yield

Which of the following is the primary reason why the realized yield on a bond differs from the yield-to-maturity? I. Purchasing a bond at a value other than par II. Selling prior to maturity at a value other than par III. Having coupon payments semiannually rather than annually IV. Reinvesting coupon payments at current market rates

A(n) ______ bond has a market price that is less than par value.

You are buying a $1,000 face value bond from your dealer. The bond pays interest semiannually on February 1 and August 1. Assume that every month has 30 days only. Today is May 30. How many months of accrued interest must you pay when you make this purchase?

A bond's annual interest payment divided by its market price is the bond's ________.

________ measures a bond's price sensitivity to changes in interest rates. It also measures the average number of years to a bond's discounted cash flows.

The convexity adjustment

A $1,000 par value bond with a 8 percent coupon paying semiannual interest has 2 years to maturity and a 8.5 percent yield to maturity. What is the Macaulay duration of the bond?

A(n) ______ bond has a market price that is greater than par value.

A bond with a face value of $1,000 has a current yield of 6.5 percent and a coupon rate of 7 percent. What is the price of the bond?

Which of the following bonds will have the greatest price change for a given change in interest rates?

You are buying a bond at a quoted price of $1,012. The bond has a 7.5 coupon rate and pays interest semiannually on April 1 and October 1. What is the invoice price of this bond if today is August1? Use a 360-day year. The bond has a $1,000 face value.

You purchased a bond one month ago for $890. The price of the bond today is $940. Which of the following is true?

A $1,000 bond with a coupon rate of 7 percent is currently selling at $1,208. If the bond has 6 years to maturity, what is the yield to maturity? The bond pays interest semiannually.

A bond with a yield to maturity of 7.4 percent is currently selling for $1,120. If the Macaulay duration of the bond is 9.12 years, what is the predicted new price of the bond if interest rates decrease by one percent?