Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:02 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 4:12 PM |
Time
taken |
9 mins 41 secs |
Grade |
10.00 out of 10.00 (100%) |
Question 1
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If
you want to get a 2% real raise at work so that you can buy 2% more of the
things you like, and you expect the inflation rate to be around 3% in the
future, you will have to ask for a
Select one:
a.
2% raise in your salary.
b.
1% decline in your salary.
c.
1% raise in your salary.
d.
5% raise in your salary.
Feedback
The correct answer
is: 5% raise in your salary.
Question 2
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Question text
Assume that you
observe the following rates on the following 20 year bonds:
U.S. Treasury bonds = 4.15 percent
AAA Corporate bonds = 6.2 percent
BBB Corporate bonds = 7.15 percent
The main reason for the differences in the interest rates is:
Select one:
a.
Convertibility premium
b.
Inflation premium
c.
Maturity risk premium
d.
Default risk premium
Feedback
The correct answer is:
Default risk premium
Question 3
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Question text
Which of these is the
interest rate that is actually observed in financial markets?
Select one:
a.
Real interest rates
b.
Real risk free rate
c.
Market premium
d.
Nominal interest rates
Feedback
The correct answer is:
Nominal interest rates
Question 4
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Question text
This
is the risk that a security issuer will miss an interest or principal payment
or continue to miss such payments.
Select one:
a.
inflation risk
b.
maturity risk
c.
default risk
d.
liquidity risk
Feedback
The correct answer
is: default risk
Question 5
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The real interest rate
is:
Select one:
a.
the rate that a
security would pay if no inflation were expected over its holding period.
b.
the rate that a
security would pay if the security had no maturity risk.
c.
the rate charged to
the corporations with the best credit rating or least amount of default risk.
d.
None of these
statements is a correct definition.
Feedback
The correct answer is:
the rate that a security would pay if no inflation were expected over its
holding period.
Question 6
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Question text
Assume
the interest rate demanded on a bond issued by Ford is 7%. If the risk premium
on this bond is equal to 5%, we would conclude that the risk-free rate is equal
to
Select one:
a.
12%
b.
5%
c.
2%
d.
-2%
Feedback
The correct answer is:
2%
Question 7
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Question text
Which
of these statements is true?
Select one:
a.
The higher the liquidity risk, the higher the interest rate that
security buyers will demand.
b.
The lower the expected inflation rate, the
higher the interest rate that security buyers will demand.
c.
The lower the default risk, the higher the interest rate that
security buyers will demand.
d.
The lower the time to maturity, the higher the
interest rate that security buyers will demand.
Feedback
The correct answer
is: The higher the liquidity risk, the
higher the interest rate that security buyers will demand.
Question 8
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Question text
Which
of the bonds below would be the most liquid?
Select one:
a.
A bond issued by Twitter.
b.
A bond issued by the United States government.
c.
A bond issued by Coca-Cola.
d.
A bond issued by Google.
Feedback
The correct answer
is: A bond issued by the United States
government.
Question 9
Correct
1.00 points out of 1.00
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Question text
An example of an
illiquid asset is:
Select one:
a.
bonds issued by GM.
b.
common stock issued by
a small but financially strong firm.
c.
common stock issued by
Apple Inc.
d.
U.S. Treasury bill.
Feedback
The correct answer is:
common stock issued by a small but financially strong firm.
Question 10
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Question text
Assume
you borrow 100 apples and in 1 year you return 107 apples. Also assume
inflation rate of 3%. Which of the below would be correct?
Select one:
a.
The real rate of interest on the loan is equal to 3%.
b.
The real rate of interest on the loan is equal to 4%.
c.
The real rate of interest on the loan is equal to 7%.
d.
The real rate of interest on the loan is equal to 10%.
Feedback
The correct answer
is: The real rate of interest on the
loan is equal to 4%.
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TrineOnline Accessibility Statements
Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:15 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 4:20 PM |
Time
taken |
4 mins 44 secs |
Points |
4.00/4.00 |
Grade |
10.00 out of 10.00 (100%) |
Question 1
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Dakota Corporation
15-year bonds have an equilibrium rate of return of 9 percent. For all
securities, the inflation risk premium is 1.95 percent and the real interest
rate is 3.65 percent. The security's liquidity risk premium is 0.35 percent and
maturity risk premium is 0.95 percent. The security has no special covenants.
Calculate the bond's default risk premium.
Select one:
a.
3.05 percent
b.
3.40 percent
c.
2.10 percent
d.
2.45 percent
Feedback
The correct answer is:
2.10 percent
Question 2
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Question text
A corporation's
10-year bonds are currently yielding a return of 7.75 percent. The expected
inflation premium is 3.0 percent annually and the real interest rate is
expected to be 3.00 percent annually over the next 10 years. The liquidity risk
premium on the corporation's bonds is 0.50 percent. The maturity risk premium
is 0.25 percent on two-year securities and increases by 0.10 percent for each
additional year to maturity. What is the default risk premium on the
corporation's 10-year bonds?
Select one:
a.
0.18 percent
b.
0.27 percent
c.
0.22 percent
d.
0.20 percent
Feedback
The correct answer is:
0.20 percent
Question 3
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Question text
Interest rates The Wall
Street Journal reports that the current rate on 10-year Treasury bonds
is 6.75 percent, on 20-year Treasury bonds is 7.25 percent, and on a 20-year
corporate bond is 8.50 percent. Assume that the maturity risk premium is zero.
If the default risk premium and liquidity risk premium on a 10-year corporate
bond is the same as that on the 20-year corporate bond, what is the current
rate on a 10-year corporate bond.
Select one:
a.
8.00 percent
b.
8.50 percent
c.
8.75 percent
d.
7.50 percent
Feedback
The correct answer is:
8.00 percent
Question 4
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Question text
A particular
security's default risk premium is 3 percent. For all securities, the inflation
risk premium is 1.75 percent and the real interest rate is 4.2 percent. The
security's liquidity risk premium is 0.35 percent and maturity risk premium is
0.95 percent. The security has no special covenants. Calculate the security's
equilibrium rate of return.
Select one:
a.
8.50 percent
b.
6.05 percent
c.
9.90 percent
d.
10.25 percent
Feedback
The correct answer is:
10.25 percent
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TrineOnline Accessibility Statements
Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:22 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 4:32 PM |
Time
taken |
10 mins 46 secs |
Grade |
8.00 out of 10.00 (80%) |
Question 1
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question
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Which
of the below is correct?
Select one:
a.
Bondholders have the option to return bonds that are callable
and get back the amount they paid from the issuing company.
b.
The time to maturity will stay fixed throughout the life of the
bond.
c.
When the bond matures the bondholder will receive back the
amount he/she paid for the bond in the bond market.
d.
When market interest rates rise we will expect an increase in
the yield to maturity on an already outstanding bond.
Feedback
The correct answer is: When
market interest rates rise we will expect an increase in the yield to maturity
on an already outstanding bond.
Question 2
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Question text
Bonds
are issued by which of the following?
Select one:
a.
All of these
b.
State and local governments
c.
Federal government or its agencies
d.
Corporations
Feedback
The correct answer
is: All of these
Question 3
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Question text
Which of the following
is an important advantage to the issuer of a bond with a call provision?
Select one:
a.
They allow for
refinancing opportunities.
b.
They are able to avoid
reinvestment rate risk.
c.
They are able to
reduce their credit risk.
d.
They are able to avoid
interest rate risk.
Feedback
The correct answer is:
They allow for refinancing opportunities.
Question 4
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Question text
Which of the following
bonds makes no interest payments?
Select one:
a.
A bond whose coupon
rates are greater than market interest rates
b.
Zero coupon bond
c.
A bond whose coupon
rates are less than the market interest rates
d.
A bond whose coupon
rate is equal to the market interest rates
Feedback
The correct answer is:
Zero coupon bond
Question 5
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Question text
All of the following
items would need to be included in the bond's indenture agreement EXCEPT:
Select one:
a.
steps that the
bondholder can take in the event that the issuer fails to pay the interest or
principal.
b.
the credit rating.
c.
the coupon rate.
d.
the call feature.
Feedback
The correct answer is:
the credit rating.
Question 6
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Question text
Under
which conditions will an investor demand a smaller return (yield) on a bond?
Select one:
a.
None of these conditions will cause an increase in the bond's
yield.
b.
Interest rates increase due to increasing inflation rate.
c.
The bond issue is downgraded from A to BBB.
d.
The bond issue is upgraded from A to AA.
Feedback
The correct answer
is: The bond issue is upgraded from A to
AA.
Question 7
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Question text
When
market interest rates increase
Select one:
a.
Bond prices will not be affected by this decline.
b.
Bond prices must also change at the same time, and the direction
of the change will depend on the coupon rate and the time left to maturity.
c.
Bond prices must decline at the same time.
d.
Bond prices must rise at the same time.
Feedback
The correct answer
is: Bond prices must decline at the
same time.
Question 8
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Question text
Which of the following
is NOT a factor that determines the coupon rate of a company's bonds?
Select one:
a.
The term of the loan.
b.
All of these are
factors that determine the coupon rate of a company's bonds.
c.
The level of interest
rates in the overall economy at the time.
d.
The amount of
uncertainty about whether the company will be able to make all the payments.
Feedback
The correct answer is:
All of these are factors that determine the coupon rate of a company's bonds.
Question 9
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Question text
Determine the interest
payment for the following three bonds: 5.5 percent coupon corporate bond (paid
semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon
bond maturing in 10 years. (Assume a $1,000 par value.)
Select one:
a.
$27.50, $32.25, $0,
respectively
b.
$5.50, $6.45, $0,
respectively
c.
$55.00, $64.50, $0,
respectively
d.
$27.50, $32.25, $100,
respectively
Feedback
The correct answer is:
$27.50, $32.25, $0, respectively
Question 10
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Question text
Consider the following
three bond quotes; a Treasury note quoted at 87:25, and a corporate bond quoted
at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate
bonds have a par value of $1,000 and the municipal bond has a par value of
$5,000, what is the price of these three bonds in dollars?
Select one:
a.
$877.81, $1,024.20,
$5,072.50, respectively
b.
$1,000, $1,024.20,
$1,001.45, respectively
c.
$1000, $1,000, $1,000,
respectively
d.
$872.50, $1,000,
$1,000, respectively
Feedback
The correct answer is:
$877.81, $1,024.20, $5,072.50, respectively
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Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:33 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 4:37 PM |
Time
taken |
3 mins 24 secs |
Points |
4.00/4.00 |
Grade |
10.00 out of 10.00 (100%) |
Question 1
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question
Question text
A 6 percent coupon
bond with 12 years left to maturity is priced to offer a 6.5 percent yield to
maturity. You believe that in one year, the yield to maturity will be 6.25
percent. What is the change in price the bond will experience in dollars?
(Assume semi-annual interest payments and $1,000 par value.)
Select one:
a.
$21.55
b.
$19.67
c.
$25.00
d.
$41.22
Feedback
The correct answer is:
$21.55
Question 2
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Question text
Calculate the price of
a 6.5 percent coupon bond with 27 years left to maturity and a market interest
rate of 5 percent. (Assume interest payments are semiannual and par value is
$1,000.)
Select one:
a.
$1,315.62
b.
$982.03
c.
$1,010.59
d.
$1,220.93
Feedback
The correct answer is:
$1,220.93
Question 3
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Question text
A corporate bond with
a 5 percent coupon has 10 years left to maturity. It has had a credit rating of
BBB and a yield to maturity of 8.0 percent. The firm has recently gotten into
some trouble and the rating agency is downgrading the bonds to BB. The new
appropriate discount rate will be 9 percent. What will be the change in the
bond's price in percentage terms? Assume interest payments are paid
semi-annually and par value is $1,000.
Select one:
a.
-6.41%
b.
-6.90%
c.
-7.60%
d.
-7.07%
Feedback
The correct answer is:
-7.07%
Question 4
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Question text
A 5.75 percent coupon
bond with 12 years left to maturity is offered for sale at $978.83. What yield
to maturity is the bond offering? (Assume interest payments are paid
semi-annually and par value is $1,000.)
Select one:
a.
3.09 percent
b.
5.75 percent
c.
3.00 percent
d.
6.00 percent
Feedback
The correct answer is:
6.00 percent
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Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:39 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 4:44 PM |
Time
taken |
4 mins 57 secs |
Grade |
10.00 out of 10.00 (100%) |
Question 1
Correct
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question
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Assume
you borrow 100 apples and in 1 year you return 107 apples. Also assume
inflation rate of 3%. Which of the below would be correct?
Select one:
a.
The real rate of interest on the loan is equal to 3%.
b.
The real rate of interest on the loan is equal to 10%.
c.
The real rate of interest on the loan is equal to 4%.
d.
The real rate of interest on the loan is equal to 7%.
Feedback
The correct answer
is: The real rate of interest on the
loan is equal to 4%.
Question 2
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Question text
Assume
the interest rate demanded on a bond issued by Ford is 7%. If the risk premium
on this bond is equal to 5%, we would conclude that the risk-free rate is equal
to
Select one:
a.
2%
b.
12%
c.
5%
d.
-2%
Feedback
The correct answer is:
2%
Question 3
Correct
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Question text
Which
of the bonds below would be the most liquid?
Select one:
a.
A bond issued by Google.
b.
A bond issued by the United States government.
c.
A bond issued by Coca-Cola.
d.
A bond issued by Twitter.
Feedback
The correct answer
is: A bond issued by the United States
government.
Question 4
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Question text
According
to the Fisher Effect equation the nominal rate of interest is equal to
Select one:
a.
The real rate of interest minus the inflation rate.
b.
The real rate of interest multiplied by the inflation rate.
c.
The real rate of interest divided by the inflation rate.
d.
The real rate of interest plus the inflation rate.
Feedback
The correct answer
is: The real rate of interest plus the
inflation rate.
Question 5
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Question text
Which of these refer
to the ease with which an asset can be converted into cash?
Select one:
a.
Secondary market
b.
Direct transfer
c.
Primary market
d.
Liquidity
Feedback
The correct answer is:
Liquidity
Question 6
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Question text
The
liquidity premium will be larger if
Select one:
a.
The default risk is lower.
b.
There is typically a lot of trading activity related to the
security.
c.
There is typically not much trading activity related to the
security.
d.
The default risk is higher.
Feedback
The correct answer
is: There is typically not much trading
activity related to the security.
Question 7
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Question text
This
is the risk that a security issuer will miss an interest or principal payment
or continue to miss such payments.
Select one:
a.
inflation risk
b.
maturity risk
c.
default risk
d.
liquidity risk
Feedback
The correct answer
is: default risk
Question 8
Correct
1.00 points out of 1.00
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Question text
An example of an illiquid
asset is:
Select one:
a.
bonds issued by GM.
b.
common stock issued by
a small but financially strong firm.
c.
common stock issued by
Apple Inc.
d.
U.S. Treasury bill.
Feedback
The correct answer is:
common stock issued by a small but financially strong firm.
Question 9
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Question text
Which of the following
is the continual increase in the price level of a basket of goods and services?
Select one:
a.
Stagflation
b.
Inflation
c.
Recession
d.
Deflation
Feedback
The correct answer is:
Inflation
Question 10
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Question text
Assume that you
observe the following rates on the following 20 year bonds:
U.S. Treasury bonds = 4.15 percent
AAA Corporate bonds = 6.2 percent
BBB Corporate bonds = 7.15 percent
The main reason for the differences in the interest rates is:
Select one:
a.
Default risk premium
b.
Maturity risk premium
c.
Convertibility premium
d.
Inflation premium
Feedback
The correct answer is:
Default risk premium
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TrineOnline Accessibility Statements
Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 4:48 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 5:05 PM |
Time
taken |
16 mins 31 secs |
Grade |
8.00 out of 10.00 (80%) |
Question 1
Correct
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question
Question text
Under
which conditions will an investor demand a larger return (yield) on a bond?
Select one:
a.
Interest rates decrease due to declining inflation rate.
b.
The bond issue is downgraded from A to BBB.
c.
None of these conditions will cause an increase in the bond's
yield.
d.
The bond issue is upgraded from A to AA.
Feedback
The correct answer
is: The bond issue is downgraded from A
to BBB.
Question 2
Correct
1.00 points out of 1.00
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Question text
Which of the following
is NOT a factor that determines the coupon rate of a company's bonds?
Select one:
a.
All of these are
factors that determine the coupon rate of a company's bonds.
b.
The amount of
uncertainty about whether the company will be able to make all the payments.
c.
The level of interest
rates in the overall economy at the time.
d.
The term of the loan.
Feedback
The correct answer is:
All of these are factors that determine the coupon rate of a company's bonds.
Question 3
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Question text
Assume that a bond is quoted
to be selling at a price equal to $93, per $100 of face value. This implies
that
Select one:
a.
The bond’s yield to maturity is 7% below its coupon rate.
b.
The bond’s yield to maturity is 7% above its coupon rate.
c.
The bond is a discount bond.
d.
The bond is a premium bond.
Feedback
The correct answer
is: The bond is a discount bond.
Question 4
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Question text
If a
bond is selling at a premium, then ________________________________.
Select one:
a.
its yield should be greater than its coupon rate.
b.
its yield should be lower than its coupon rate.
c.
its coupon rate must be equal to one-half the yield to maturity
for a 5-year bond.
d.
its yield should be equal to its coupon rate.
Feedback
The correct answer
is: its yield should be lower than its
coupon rate.
Question 5
Correct
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Question text
Which of the following
bonds makes no interest payments?
Select one:
a.
A bond whose coupon
rate is equal to the market interest rates
b.
Zero coupon bond
c.
A bond whose coupon
rates are greater than market interest rates
d.
A bond whose coupon
rates are less than the market interest rates
Feedback
The correct answer is:
Zero coupon bond
Question 6
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Question text
If
the coupon rate equals 7% then a corresponding $1,000 face value bond
Select one:
a.
Will yield 7% to a buyer of the bond.
b.
Will pay regular amounts that will depend on its yield to
maturity.
c.
Will pay $35 every six months.
d.
Will pay $70 every six months.
Feedback
The correct answer
is: Will pay $35 every six months.
Question 7
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Question text
All of the following
items would need to be included in the bond's indenture agreement EXCEPT:
Select one:
a.
steps that the
bondholder can take in the event that the issuer fails to pay the interest or principal.
b.
the call feature.
c.
the coupon rate.
d.
the credit rating.
Feedback
The correct answer is:
the credit rating.
Question 8
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Question text
Rank the following
bonds in order from lowest credit risk to highest risk all with the same time
to maturity, by their yield to maturity: JM Corporate bond with yield of 12.25
percent, IB Corporate bond with yield of 4.49 percent, TC Corporate bond with
yield of 8.76 percent, and B&O Corporate bond with a yield of 5.99 percent.
Select one:
a.
IB bond, B&O bond,
TC bond, JM bond
b.
JM bond, IB bond,
B&O bond, TC bond
c.
JM bond, TC bond,
B&O bond, IB bond
d.
TC bond, B&O bond,
IB bond, JM bond
Feedback
The correct answer is:
IB bond, B&O bond, TC bond, JM bond
Question 9
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Question text
Which of the following
statements is correct?
Select one:
a.
The call feature does
not impact the return that investors demand.
b.
All else the same, an investor
will require more return to invest in a callable bond than one that is not
callable.
c.
All else the same, an
investor will require less return to invest in a callable bond than one that is
not callable.
d.
We would need to know
the current level of interest rates to answer this question.
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The correct answer is:
All else the same, an investor will require more return to invest in a callable
bond than one that is not callable.
Question 10
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Consider the following
three bond quotes; a Treasury note quoted at 87:25, and a corporate bond quoted
at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate
bonds have a par value of $1,000 and the municipal bond has a par value of
$5,000, what is the price of these three bonds in dollars?
Select one:
a.
$1,000, $1,024.20,
$1,001.45, respectively
b.
$872.50, $1,000,
$1,000, respectively
c.
$877.81, $1,024.20,
$5,072.50, respectively
d.
$1000, $1,000, $1,000,
respectively
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The correct answer is:
$877.81, $1,024.20, $5,072.50, respectively
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Trine | Moodle
FIN--5063-1D2-FA-2021
- Corporate Finance
Started
on |
Sunday, November 21,
2021, 5:05 PM |
State |
Finished |
Completed
on |
Sunday, November 21,
2021, 5:10 PM |
Time
taken |
5 mins |
Points |
4.00/4.00 |
Grade |
10.00 out of 10.00 (100%) |
Question 1
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A bond with 14 years
to maturity is selling for $1,070 and has a yield to maturity of 10.06 percent.
If this bond pays its coupon payments semi-annually and par value is $1,000,
what is the bond's annual coupon rate?
Select one:
a.
8.19 percent
b.
5.50 percent
c.
9.57 percent
d.
11.00 percent
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The correct answer is:
11.00 percent
Question 2
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A corporate bond with
a 5.75 percent coupon has 15 years left to maturity. It has had a credit rating
of BB and a yield to maturity of 6.25 percent. The firm has recently gotten
more financially stable and the rating agency is upgrading the bonds to BBB.
The new appropriate discount rate will be 6.00 percent. What will be the change
in the bond's price in dollars? (Assume interest payments are paid
semi-annually and a par value of $1,000.)
Select one:
a.
decrease $23.72
b.
increase $22.25
c.
decrease $22.25
d.
increase $23.72
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The correct answer is:
increase $23.72
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Calculate the price of
a 6.5 percent coupon bond with 27 years left to maturity and a market interest
rate of 5 percent. (Assume interest payments are semiannual and par value is
$1,000.)
Select one:
a.
$1,315.62
b.
$1,010.59
c.
$1,220.93
d.
$982.03
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The correct answer is:
$1,220.93
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A 6 percent coupon
bond with 12 years left to maturity is priced to offer a 6.5 percent yield to
maturity. You believe that in one year, the yield to maturity will be 6.25
percent. What is the change in price the bond will experience in dollars?
(Assume semi-annual interest payments and $1,000 par value.)
Select one:
a.
$21.55
b.
$25.00
c.
$41.22
d.
$19.67
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The correct answer is:
$21.55
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Question 2
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Question 4
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Why are bonds known as a fixed-income security?
Because the cash flows that a bondholder gets from holding the bond, if the bond is held until maturity, are fixed.
Because the return on bonds is fixed over the life of the bond.
Because all non-callable bonds must have exactly the same contract terms fixed in their bond indentures.
Because the price of the bond is fixed over the life of the bond.
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Question 7
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Question 8
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Question 9
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Which of the debt contracts below would be associated with the biggest interest rate risk?
A 5-year General Motors bond
A 15-year Home Depot bond
A 10-year U.S. Treasury bond
A 3-year car loan
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Question 10
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Question 1
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When market interest rates increase
Bond prices will not be affected by this decline.
Bond prices must decline at the same time.
Bond prices must also change at the same time, and the direction of the change will depend on the coupon rate and the time left to maturity.
Bond prices must rise at the same time.
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Question 2
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Question 3
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Assume that a bond is quoted to be selling at a price equal to $106, per $100 of face value. This implies that
The bond is a discount bond.
The bond’s yield to maturity is 6% below its coupon rate.
The bond’s yield to maturity is 6% above its coupon rate.
The bond is a premium bond.
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Question 5
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When we say that a bondholder faces interest rate risk, we mean that the bondholder faces the possibility of a/an __________ in market interest rates and a/an _________ in the value of the bond as a result.
Decline; decline
Increase; decline
Increase; increase
Decline; increase
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Question 6
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When market interest rates decline
Bond prices will not be affected by this decline.
Bond prices must also change at the same time, and the direction of the change will depend on the coupon rate and the time left to maturity.
Bond prices must also decline at the same time.
Bond prices must rise at the same time.
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Question 7
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If a bond’s yield to maturity falls below its coupon rate
The bond must be selling for a price lower than its par value.
The coupon rate on the bond must decline as well.
The bond must be selling for a price higher than its par value.
The price of the bond must fall.
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Question 8
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Assume that a bond is quoted to be selling at a price equal to $93, per $100 of face value. This implies that
The bond’s yield to maturity is 7% above its coupon rate.
The bond is a discount bond.
The bond’s yield to maturity is 7% below its coupon rate.
The bond is a premium bond.
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Question 9
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If a bond is selling at a premium, then ________________________________.
its coupon rate must be equal to one-half the yield to maturity for a 5-year bond.
its yield should be greater than its coupon rate.
its yield should be lower than its coupon rate.
its yield should be equal to its coupon rate.
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Question 10
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If a bond’s yield to maturity rises above its coupon rate
The price of the bond must rise.
The bond must be selling for a price higher than its par value.
The coupon rate on the bond must rise as well.
The bond must be selling for a price lower than its par value.
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Question 2
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Bonds are issued by which of the following?
All of these
State and local governments
Federal government or its agencies
Corporations
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Question 3
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Question 4
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Question 5
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Question 6
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If a bond’s yield to maturity falls below its coupon rate
The price of the bond must fall.
The bond must be selling for a price lower than its par value.
The coupon rate on the bond must decline as well.
The bond must be selling for a price higher than its par value.
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Question 7
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Regarding a bond's characteristics, which of the following is the principal loan amount that the borrower must repay?
par or face value
time to maturity value
maturity date
call premium
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Question 8
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Which of the below is correct?
When the bond matures the bondholder will receive back the amount he/she paid for the bond in the bond market.
The time to maturity will stay fixed throughout the life of the bond.
Bondholders have the option to return bonds that are callable and get back the amount they paid from the issuing company.
When market interest rates rise we will expect an increase in the yield to maturity on an already outstanding bond.
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Question 9
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Question 10
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If a bond’s yield to maturity rises above its coupon rate
The bond must be selling for a price higher than its par value.
The price of the bond must rise.
The coupon rate on the bond must rise as well.
The bond must be selling for a price lower than its par value.
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Assume that a bond is quoted to be selling at a price equal to $93, per $100 of face value. This implies that
The bond’s yield to maturity is 7% below its coupon rate.
The bond is a discount bond.
The bond’s yield to maturity is 7% above its coupon rate.
The bond is a premium bond.
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Question 2
Question text
Bond prices are usually quoted
Discounted by the coupon rate.
In dollars and give the exact amount that the buyer will pay for one bond.
As a percentage of its par value.
As the dollar price of each $1,000 of the par value.
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Question 3
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Assume a bond has a coupon rate of 3%, par value of $1,000, and 1 year left to maturity. Assuming the bond indenture specifies semi-annual payments, what will be the cash flows to a buyer of the bond, provided the buyer pays $975 for the bond and holds it until it matures?
On payment of $30, and another payment of $975 when the bond matures.
One payment of $15, and another payment of $1,015 when the bond matures.
On payment of $30, and another payment of $1,030 when the bond matures.
One payment of $15, and another payment of $975 when the bond matures.
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Question 4
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Question 6
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Question 7
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Question 8
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Question 9
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Which of the below is correct?
When market interest rates rise we will expect an increase in the yield to maturity on an already outstanding bond.
Bondholders have the option to return bonds that are callable and get back the amount they paid from the issuing company.
The time to maturity will stay fixed throughout the life of the bond.
When the bond matures the bondholder will receive back the amount he/she paid for the bond in the bond market.
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Question 10
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When we say that a bondholder faces interest rate risk, we mean that the bondholder faces the possibility of a/an __________ in market interest rates and a/an _________ in the value of the bond as a result.
Increase; increase
Increase; decline
Decline; increase
Decline; decline
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Assume that a bond is quoted to be selling at a price equal to $106, per $100 of face value. This implies that
The bond’s yield to maturity is 6% above its coupon rate.
The bond is a premium bond.
The bond’s yield to maturity is 6% below its coupon rate.
The bond is a discount bond.
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Question 2
Question text
Bond prices are usually quoted
As a percentage of its par value.
In dollars and give the exact amount that the buyer will pay for one bond.
Discounted by the coupon rate.
As the dollar price of each $1,000 of the par value.
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Question 3
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Question 4
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Which of the below is correct?
The time to maturity will stay fixed throughout the life of the bond.
When the bond matures the bondholder will receive back the amount he/she paid for the bond in the bond market.
When market interest rates rise we will expect an increase in the yield to maturity on an already outstanding bond.
Bondholders have the option to return bonds that are callable and get back the amount they paid from the issuing company.
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Question 5
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Question 7
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Question 8
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Question 9
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Question 10
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Which of the debt contracts below would be associated with the biggest interest rate risk?
A 3-year car loan
A 10-year U.S. Treasury bond
A 15-year Home Depot bond
A 5-year General Motors bond
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