投資學(xué)第7版TestBank答案14

1、Multiple Choice Questions 1. The current yield on a bond is equal to . A) annual interest divided by the current market price B) the yield to maturity C) annual interest divided by the par value D) the internal rate of return E) none of the above Answer: A Difficulty: Easy Rationale: A is current yi

2、eld 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) 7.00 B) 6.53 C) 7.24 D) 8.53 E) 7.18 Answer: E Difficulty: Easy Rationale: 70/975 = 7.18. 3. If a 6% coupon bond is trading for $950.00, it has a current yield of pe

3、rcent. 6.5 6.3 6.1 6.0 6.6 A) B) C) D) E) Answer: B Difficulty: Easy Rationale: 60/950 = 6.3. 4. 5. 7.8 8.7 7.6 7.9 8.1 7.0 7.4 7.1 6.9 6.7 If an 8% coupon bond is trading for $1025.00, it has a current yield of percent. A) B) C) D) E) Answer: A Difficulty: Easy Rationale: 80/1025 = 7.8. If a 7.5% c

4、oupon bond is trading for $1050.00, it has a current yield of percent. A) B) C) D) E) Answer: C Difficulty: Easy Rationale: 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 y

5、ield on this bond is . A) 10.65% B) 10.45% C) 10.95% D) 10.52% E) none of the above Answer: A Difficulty: Moderate Rationale: FV = 1000, n = 4, PMT = 100, i = 12, PV= 939.25; $100 / $939.25 = 10.65%. 7. A coupon bond pays annual interest, has a par value of $1,000, matures in 12 years, has a coupon

6、rate of 11%, and has a yield to maturity of 12%. The current yield on this bond is . A) 10.39% B) 10.43% C) 10.58% D) 10.66% E) none of the above Answer: D Difficulty: Moderate Rationale: FV = 1000, n = 12, PMT = 110, i = 12, PV= 938.06; $100 / $938.06 = 10.66%. 8. Of the following four investments,

7、 is considered the safest. A) commercial paper B) corporate bonds C) U. S. Agency issues D) Treasury bonds E) Treasury bills Answer: E Difficulty: Easy Rationale: Only Treasury issues are insured by the U. S. government; the shorter-term the instrument, the safer the instrument. 9. To earn a high ra

8、ting from the bond rating agencies, a firm should have A) a low times interest earned ratio B) a low debt to equity ratio C) a high quick ratio D) B and C E) A and C Answer: D Difficulty: Easy Rationale: High values for the times interest and quick ratios and a low debt to equity ratio are desirable

9、 indicators of safety. 10. At issue, coupon bonds typically sell A) above par value B) below par C) at or near par value D) at a value unrelated to par E) none of the above Answer: C Difficulty: Easy Rationale: If the investment banker has appraised the market and the quality of the bond correctly,

10、the bond will sell at or near par (unless interest rates have changed very dramatically and very quickly around the time of issuance). 11. Accrued interest A) is quoted in the bond price in the financial press. B) must be paid by the buyer of the bond and remitted to the seller of the bond. C) must

11、be paid to the broker for the inconvenience of selling bonds between maturity dates. D) A and B. E) A and C. Answer: B Difficulty: Moderate Rationale: Accrued interest must be paid by the buyer, but is not included in the quotations page price. 12. The invoice price of a bond that a buyer would pay

12、is equal to A) the asked price plus accrued interest. B) the asked price less accrued interest. C) the bid price plus accrued interest. D) the bid price less accrued interest. E) the bid price. Answer: A Difficulty: Easy Rationale: The buyer of a bond will buy at the asked price and will also be inv

13、oiced for any accrued interest due to the seller. Chapter 14 Bo nd Prices and Y ields 13. An 8% coup on U. S. Treasury note pays 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. A) $491.8 B) $800.00 C)

14、$983.61 D) $1,661.20 E) none of the above An swer: D Difficulty: Moderate Rationale: 76/183($4,000) = $1,661.20. Approximation: .08/12*100,000=666.67 per month. 666.67/mo nth * 2.5 mon ths = 1.666.67. 14. A coup on bond is reported as hav ing an ask price of 113% of the $1,000 par value in the Wall

15、Street Jour nal. If the last in terest payme nt was made two mon ths ago and the coup on rate is 12%, the inv oice price of the bond will be. A) $1,100 B) $1,110 C) $1,150 D) $1,160 E) none of the above An swer: C Difficulty: Moderate Rationale: $1,130 + $20 (accrued interest) = $1,150. 15. The bond

16、s of Ford Motor Compa ny have received a rati ng of D by Moodys. The D rat ing in dicates A) the bonds are insured B) the bonds are junk bonds C) the bonds are referred to as high yield bonds D) A and B E) B and C An swer: E Difficulty: Easy Rati on ale: D rati ngs are risky bon ds, ofte n called ju

17、nk bonds (or high yield bonds by those marketi ng such bon ds). 16. The bond market A) can be quite thin. B) primarily consists of a network of bond dealers in the over the counter market. C) consists of many investors on any given day. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: T

18、he bond market, unlike the stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers. 17. Ceteris paribus, the price and yield on a bond are A) positively related. B) negatively related. C) sometimes positively and sometimes negatively related. E) not related. E

19、) indefinitely related. Answer: B Difficulty: Easy Rationale: Bond prices and yields are inversely related. 18. The is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity. A) current yield B) dividend yield C) P/E ratio D) yield to

20、 maturity E) discount yield Answer: D Difficulty: Easy Rationale: The current yield is the annual interest as a percent of current market price; the other choices do not apply to bonds. Chapter 14 Bo nd Prices and Y ields 19. Thegives the number of shares for which each convertible bond can be excha

21、nged. A) conversion ratio B) current ratio C) P/E ratio D) conversion premium E) convertible floor An swer: A Difficulty: Easy Rati on ale: The conv ersi on premium is the amount for which the bond sells above conv ersi on value; the price of bond as a straight bond provides the floor. The other ter

22、ms are not specifically releva nt to conv ertible bon ds. 20. A coup on bond is a bond that. A) pays in terest on a regular basis (typically every six mon ths) B) does not pay interest on a regular basis but pays a lump sum at maturity C) can always be conv erted into a specific nu mber of shares of

23、 com mon stock in the issu ing compa ny D) always sells at par E) none of the above An swer: A Difficulty: Easy Rati on ale: A coup on bond will pay the coup on rate of in terest on a semia nnual basis uni ess the firm defaults on the bond. Conv ertible bonds are specific types of bon ds. 21. Abond

24、is a bond where the bondholder has the right to cash in the bond before maturity at a specified price after a specific date. A) callable B) coupon C) put D) Treasury E) zero-coup on An swer: C Difficulty: Easy Rati on ale: Any bond may be redeemed prior to maturity, but all bonds other tha n put bon

25、ds are redeemed at a price determ ined by the prevaili ng in terest rates. 22. Callable bonds A) are called when interest rates decline appreciably. B) have a call price that declines as time passes. C) are called when interest rates increase appreciably. D) A and B. E) B and C. Answer: D Difficulty

26、: Easy Rationale: 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 time passes and maturity is reached. 23. A Treasury bond due in one year has a yield of 5.7%; a Treasur

27、y 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 by 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, are A) 1.0% and 1.2% B) 0.7% and 1.5% C) 1

28、.2% and 1.0% D) 0.8% and 1.3% E) none of the above Answer: D Difficulty: Moderate Rationale: Shell: 6.5% - 5.7% = .8%; Ford: 7.5% - 6.2% = 1.3%. 24. A 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

29、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 and Lucent Technologies, respectively, are: A) 1.6% and 3.3% B) 0.5% and .7% C) 3.3% and 1.6% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: Mode

30、rate Rationale: Mobil: 6.2% - 4.6% = 1.6%; Lucent Technologies: 8.9% - 5.6% = 3.3%. 25. A Treasury bond due in one year has a yield of 6.2%; a Treasury bond 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 yie

31、ld of 7.2%. The default risk premiums on the bonds issued by Exxon and Xerox, respectively, are A) 1.0% and 1.2% B) 0.5% and .7% C) 1.2% and 1.0% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: Moderate Rationale: Exxon: 7.2% - 6.2% = 1.0%; Xerox: 7. 9% - 6.7% = 1.2%. 26. Floating-rate b

32、onds are designed to while convertible bonds are designed to . A) minimize the holders interest rate risk; give the investor the ability to share in the price appreciation of the companys stock B) maximize the holders interest rate risk; give the investor the ability to share in the price appreciati

33、on of the companys stock C) minimize the holders interest rate risk; give the investor the ability to benefit from interest rate changes D) maximize the holders interest rate risk; give investor the ability to share in the profits of the issuing company E) none of the above Answer: A Difficulty: Mod

34、erate Rationale: 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 the appreciation of the stock price, either by conv

35、erting 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 this bond is: A) 8.0% B) 8.3% C) 9.0% D) 10.0% E)

36、 none of the above Answer: C Difficulty: Easy Rationale: When a bond sells at par value, the coupon rate is equal to the yield to maturity. Chapter 14 Bo nd Prices and Y ields 28. A coup on bond that pays in terest annu ally has a par value of $1,000, matures in 5 years, and has a yield to maturity

37、of 10%. The in tri nsic value of the bond today will be if the coup on rate is 7%. A) $712.99 B) $620.92 C) $1,123.01 D) $886.28 E) $1,000.00 An swer: D Difficulty: Moderate Ratio nale: FV = 1000, PMT = 70, n = 5, i = 10, PV = 886.28. 29. A coup on bond that pays in terest annu ally, has a par value

38、 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 coup on rate is 12%. A) $922.77 B) $924.16 C) $1,075.82 D) $1,077.20 E) none of the above An swer: C Difficulty: Moderate Ratio nale: FV = 1000, PMT = 120, n = 5, i = 10, PV = 1

39、075.82 30. A coup on bond that pays 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 coup on rate is 8%. A) $922.78 B) $924.16 C) $1,075.80 D) $1,077.20 E) none of the above An swer: A

40、Difficulty: Moderate Ratio nale: FV = 1000, PMT = 40, n = 10, i = 5, PV = 922.78 Chapter 14 Bo nd Prices and Y ields 31. A coup on bond that pays 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

41、be if the coup on rate is 12%. A) $922.77 B) $924.16 C) $1,075.80 D) $1,077.22 E) none of the above An swer: D Difficulty: Moderate Ratio nale: FV = 1000, PMT = 60, n = 10, i = 5, PV = 1077.22 32. A coup on bond that pays in terest of $100 annu ally has a par value of $1,000, matures in 5 years, and

42、 is selli ng today at a $72 disco unt from par value. The yield to maturity on this bond is. A) 6.00% B) 8.33% C) 12.00% D) 60.00% E) none of the above An swer: C Difficulty: Moderate Ratio nale: FV = 1000, PMT = 100, n = 5, PV = -928, i = 11.997% 33. You purchased an annual in terest coup on bond o

43、ne year ago that now has 6 years rema ining un til maturity. The coup on rate of in terest was 10% and par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. The amount you paid for this bond one year ago was A) $1,057.50. B) $1,075.50. C) $1,088.50. D) $1.092.46. E)

44、 $1,104.13. An swer: E Difficulty: Moderate Ratio nale: FV = 1000, PMT = 100, n = 7, i = 8, PV = 1104.13 34. 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 p

45、urchased the bond, 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 been A) 7.00% B) 7.82% C) 8.00% D) 11.95% E) none of the above

46、Answer: C Difficulty: Difficult Rationale: 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. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays inte

47、rest of $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) both bonds will increase in value, but bond A will increase more than bond B B) both bonds will increase in value, but bond B will increas

48、e more than bond A C) both bonds will decrease in value, but bond A will decrease more than bond B D) both bonds will decrease in value, but bond B will decrease more than bond A E) none of the above Answer: B Difficulty: Moderate Rationale: The longer the maturity, the greater the price change when

49、 interest rates change. 36. A zero-coupon bond 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. A) 422.41 B) $501.87 C) $513.16 D) $483.49 E) none of the above Answer: B Difficulty: Moderate Rationale: $1,000/(1.09)8

50、= $501.87 37. You have just purchased a 10-year zero-coupon 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. A) 10.00% B) 20.42% C) 13.8

51、% D) 1.4% E) none of the above Answer: D Difficulty: Moderate Rationale: $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 . A) 1

52、2.40% B) 12.55% C) 12.62% D) 12.68% E) none of the above Answer: D Difficulty: Moderate Rationale: $990/$99,010 = 0.01; (1.011)2 - 1.0 = 12.68%. 39. A 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) 12.40% B) 12.

53、55% C) 12.62% D) 12.68% E) none of the above Answer: C Difficulty: Moderate Rationale: $1,961/$98,039 = 0.02; (1.026) - 1 = 12.62%. 40. A 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) 12.40% B) 12.55% C) 12.6

54、2% D) 12.68% E) none of the above Answer: B Difficulty: Moderate Rationale: $2,913/$97,087 = 0.03; (1.034) - 1.00 = 12.55%. 41. A 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

55、price the bond should sell for today is . A) $922.77 B) $924.16 C) $1,075.80 D) $1,077.20 E) none of the above Answer: D Difficulty: Moderate Rationale: (1.1025)1/2 - 1 = 5%, N=10, I=5%, PMT=60, FV=1000, PV=1,077.22. 42. A convertible bond has a par value of $1,000 and a current market price of $850

56、. The current price of the issuing firms stock is $29 and the conversion ratio is 30 shares. The bonds market conversion value is . A) $729 B) $810 C) $870 D) $1,000 E) none of the above Answer: C Difficulty: Easy Rationale: 30 shares X $29/share = $870. Chapter 14 Bo nd Prices and Y ields 43. A con

57、vertible bond has a par value of $1,000 and a current market value of $850. The curre nt price of the issu ing firms stock is $27 and the con versi on ratio is 30 shares. The bon ds conv ersi on premium is. A) $40 B) $150 C) $190 D) $200 E) none of the above An swer: A Difficulty: Moderate Rationale

58、: $850 - $810 = $40. Use the followi ng to an swer questi ons 44-47: Con sider the followi ng $1,000 par value zero-coup on bonds: Bond Years to Maturity Price A 1 S909.09 B 2 1811.62 C 3 $711.72 D 彳 44. The yield to maturity on bond A is A) 10% B) 11% C) 12% D) 14% E) none of the above An swer: A D

59、ifficulty: Moderate Rationale: ($1,000 - $909.09)/$909.09 = 10%. 45. The yield to maturity on bond B is A) 10% B) 11% C) 12% D) 14% E) none of the above An swer: B Difficulty: Moderate Ratio nale: ($1,000 - $811.62)/$811.62 = 0.2321; (1.23211)2 - 1.0 = 11%. 46. The yield to maturity on bond C is . A

60、) 10% B) 11% C) 12% D) 14% E) none of the above Answer: C Difficulty: Moderate Rationale: ($1,000 - $711.78)/$711.78 = 0.404928; (1.4049281)/3 - 1.0 = 12%. 47. The yield to maturity on bond D is A) 10% B) 11% C) 12% D) 14% E) none of the above Answer: C Difficulty: Moderate Rationale: ($1,000 - $635