QUESTION 1The most common purchaser(s) of bonds are:life insurance companies and pension funds.speculators.Donald Trump.James Bond.5 points QUESTION 2Which one of the following statements about vanilla bonds is false?They have fixed coupon payments.The face value, or par value, for most corporate bonds is $1,000.Coupon payments are usually made quarterly.The bond’s coupon rate is calculated as the annual coupon payment divided by the bond’s face value.5 points QUESTION 3Which of the following statements is true about zero coupon bonds?They typically sell at a premium over par when they are first issued.They typically sell for a higher price than similar vanilla coupon bonds.They are always convertible into common stock.They typically sell at a deep discount below par when they are first issued.5 points QUESTION 4Which one of the following statements is true?All else equal long-term bonds have lower price volatility than short-term bonds.There is an inverse relation between bond prices and market interest rates.All else equal short-term bonds are more risky than long-term bonds.All else equal US government bonds are more risky than corporate bonds.5 points QUESTION 5If the bond’s coupon rate is equal to the market rate then the bond will sell at a priceequal to its face valuegreater than its face valueless than its face valueequal to its foreign currency value, e.g., its price in British pounds5 points QUESTION 6Bonds sell at a premium when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 7Bonds sell at a discount when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 8When calculating the price of a bond that pays a semiannual coupon one needs touse double the number of years until maturity for the number of paymentsuse half the annual coupon paymentuse half the annual rate of return as the discount rateall of the above5 points QUESTION 9The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal paymentsmore than the price of the bondequal to zeroequal to the price of the bondless than the price of the bond5 points QUESTION 10An investor owns a 10-year US government bond with a 9 percent coupon rate. If the yield-to-maturity on the bond is 8 percent then this bond is selling forits par value.a discount.a premium.its face value.5 points QUESTION 11Which of the following statements is true?For a given change in market interest rates, the prices of higher-coupon bonds change more than the prices of lower-coupon bonds.If market interest rates rise, a 1-year bond will fall in value more than a 10-year bond.If market interest rates rise, bond prices will rise.If market interest rates rise, a 10-year bond will fall in value more than a 1-year bond.5 points QUESTION 12The three economic factors that affect the shape of the yield curve are:the real rate of interest, the expected rate of inflation, and marketability.the real rate of interest, the expected rate of inflation, and interest rate risk.the nominal rate of interest, the expected rate of inflation, and default risk.the real rate of interest, the nominal rate of interest, and currency risk.5 points QUESTION 13Downward-slopping yield curves are usually observedwhen the economy is growing quickly.before the beginning of a recession.always.never.5 points QUESTION 14BA Corp is issuing a 10 year bond with a coupon rate of 8 percent and a par value of $1,000. The market interest rate on similar bonds is currently 6 percent. If the coupon payments are made annually, what is the value of this bond?5 points QUESTION 15Knight, Inc. has issued a 3 year bond with a $1,000 par value and an annual coupon rate of 6 percent. The current market rate of interest is 5 percent. What is the value of this bond if the coupon payments are made semiannually?5 points QUESTION 16Regatta, Inc., has bonds outstanding that pay an 8.250 percent coupon rate on a $1,000 face value. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. How many years until the bonds mature if the current value of the bonds is $1,056.57 and payments are made annually?5 points QUESTION 17Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the market interest rate on these types of bonds is currently 9 percent, what is the current price of this bond?5 points QUESTION 18Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the current market value of the bond is $3,104.61, what is the bond’s yield to maturity?5 points QUESTION 19Rudy Sandberg wants to invest in 5 year bonds that are currently priced at $850.00. The bonds have a coupon rate of 10 percent and semiannual coupon payments. If the par value of the bonds is $1,000, what is the bond’s effective annual yield (EAY)?5 points QUESTION 20You own a 5 year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments. The bond is currently worth $810.46. If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years left until maturity?

QUESTION 1The most common purchaser(s) of bonds are:life insurance companies and pension funds.speculators.Donald Trump.James Bond.5 points QUESTION 2Which one of the following statements about vanilla bonds is false?They have fixed coupon payments.The face value, or par value, for most corporate bonds is $1,000.Coupon payments are usually made quarterly.The bond’s coupon rate is calculated as the annual coupon payment divided by the bond’s face value.5 points QUESTION 3Which of the following statements is true about zero coupon bonds?They typically sell at a premium over par when they are first issued.They typically sell for a higher price than similar vanilla coupon bonds.They are always convertible into common stock.They typically sell at a deep discount below par when they are first issued.5 points QUESTION 4Which one of the following statements is true?All else equal long-term bonds have lower price volatility than short-term bonds.There is an inverse relation between bond prices and market interest rates.All else equal short-term bonds are more risky than long-term bonds.All else equal US government bonds are more risky than corporate bonds.5 points QUESTION 5If the bond’s coupon rate is equal to the market rate then the bond will sell at a priceequal to its face valuegreater than its face valueless than its face valueequal to its foreign currency value, e.g., its price in British pounds5 points QUESTION 6Bonds sell at a premium when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 7Bonds sell at a discount when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 8When calculating the price of a bond that pays a semiannual coupon one needs touse double the number of years until maturity for the number of paymentsuse half the annual coupon paymentuse half the annual rate of return as the discount rateall of the above5 points QUESTION 9The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal paymentsmore than the price of the bondequal to zeroequal to the price of the bondless than the price of the bond5 points QUESTION 10An investor owns a 10-year US government bond with a 9 percent coupon rate. If the yield-to-maturity on the bond is 8 percent then this bond is selling forits par value.a discount.a premium.its face value.5 points QUESTION 11Which of the following statements is true?For a given change in market interest rates, the prices of higher-coupon bonds change more than the prices of lower-coupon bonds.If market interest rates rise, a 1-year bond will fall in value more than a 10-year bond.If market interest rates rise, bond prices will rise.If market interest rates rise, a 10-year bond will fall in value more than a 1-year bond.5 points QUESTION 12The three economic factors that affect the shape of the yield curve are:the real rate of interest, the expected rate of inflation, and marketability.the real rate of interest, the expected rate of inflation, and interest rate risk.the nominal rate of interest, the expected rate of inflation, and default risk.the real rate of interest, the nominal rate of interest, and currency risk.5 points QUESTION 13Downward-slopping yield curves are usually observedwhen the economy is growing quickly.before the beginning of a recession.always.never.5 points QUESTION 14BA Corp is issuing a 10 year bond with a coupon rate of 8 percent and a par value of $1,000. The market interest rate on similar bonds is currently 6 percent. If the coupon payments are made annually, what is the value of this bond?5 points QUESTION 15Knight, Inc. has issued a 3 year bond with a $1,000 par value and an annual coupon rate of 6 percent. The current market rate of interest is 5 percent. What is the value of this bond if the coupon payments are made semiannually?5 points QUESTION 16Regatta, Inc., has bonds outstanding that pay an 8.250 percent coupon rate on a $1,000 face value. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. How many years until the bonds mature if the current value of the bonds is $1,056.57 and payments are made annually?5 points QUESTION 17Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the market interest rate on these types of bonds is currently 9 percent, what is the current price of this bond?5 points QUESTION 18Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the current market value of the bond is $3,104.61, what is the bond’s yield to maturity?5 points QUESTION 19Rudy Sandberg wants to invest in 5 year bonds that are currently priced at $850.00. The bonds have a coupon rate of 10 percent and semiannual coupon payments. If the par value of the bonds is $1,000, what is the bond’s effective annual yield (EAY)?5 points QUESTION 20You own a 5 year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments. The bond is currently worth $810.46. If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years left until maturity?

QUESTION 1The most common purchaser(s) of bonds are:life insurance companies and pension funds.speculators.Donald Trump.James Bond.5 points QUESTION 2Which one of the following statements about vanilla bonds is false?They have fixed coupon payments.The face value, or par value, for most corporate bonds is $1,000.Coupon payments are usually made quarterly.The bond’s coupon rate is calculated as the annual coupon payment divided by the bond’s face value.5 points QUESTION 3Which of the following statements is true about zero coupon bonds?They typically sell at a premium over par when they are first issued.They typically sell for a higher price than similar vanilla coupon bonds.They are always convertible into common stock.They typically sell at a deep discount below par when they are first issued.5 points QUESTION 4Which one of the following statements is true?All else equal long-term bonds have lower price volatility than short-term bonds.There is an inverse relation between bond prices and market interest rates.All else equal short-term bonds are more risky than long-term bonds.All else equal US government bonds are more risky than corporate bonds.5 points QUESTION 5If the bond’s coupon rate is equal to the market rate then the bond will sell at a priceequal to its face valuegreater than its face valueless than its face valueequal to its foreign currency value, e.g., its price in British pounds5 points QUESTION 6Bonds sell at a premium when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 7Bonds sell at a discount when the market rate of interest is:less than the bond’s coupon rate.greater than the bond’s coupon rate.equal to the bond’s coupon rate.equal to the risk-free rate.5 points QUESTION 8When calculating the price of a bond that pays a semiannual coupon one needs touse double the number of years until maturity for the number of paymentsuse half the annual coupon paymentuse half the annual rate of return as the discount rateall of the above5 points QUESTION 9The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal paymentsmore than the price of the bondequal to zeroequal to the price of the bondless than the price of the bond5 points QUESTION 10An investor owns a 10-year US government bond with a 9 percent coupon rate. If the yield-to-maturity on the bond is 8 percent then this bond is selling forits par value.a discount.a premium.its face value.5 points QUESTION 11Which of the following statements is true?For a given change in market interest rates, the prices of higher-coupon bonds change more than the prices of lower-coupon bonds.If market interest rates rise, a 1-year bond will fall in value more than a 10-year bond.If market interest rates rise, bond prices will rise.If market interest rates rise, a 10-year bond will fall in value more than a 1-year bond.5 points QUESTION 12The three economic factors that affect the shape of the yield curve are:the real rate of interest, the expected rate of inflation, and marketability.the real rate of interest, the expected rate of inflation, and interest rate risk.the nominal rate of interest, the expected rate of inflation, and default risk.the real rate of interest, the nominal rate of interest, and currency risk.5 points QUESTION 13Downward-slopping yield curves are usually observedwhen the economy is growing quickly.before the beginning of a recession.always.never.5 points QUESTION 14BA Corp is issuing a 10 year bond with a coupon rate of 8 percent and a par value of $1,000. The market interest rate on similar bonds is currently 6 percent. If the coupon payments are made annually, what is the value of this bond?5 points QUESTION 15Knight, Inc. has issued a 3 year bond with a $1,000 par value and an annual coupon rate of 6 percent. The current market rate of interest is 5 percent. What is the value of this bond if the coupon payments are made semiannually?5 points QUESTION 16Regatta, Inc., has bonds outstanding that pay an 8.250 percent coupon rate on a $1,000 face value. Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent. How many years until the bonds mature if the current value of the bonds is $1,056.57 and payments are made annually?5 points QUESTION 17Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the market interest rate on these types of bonds is currently 9 percent, what is the current price of this bond?5 points QUESTION 18Diane Carter is interested in buying a 5 year zero coupon bond with a face value of $5,000. If the current market value of the bond is $3,104.61, what is the bond’s yield to maturity?5 points QUESTION 19Rudy Sandberg wants to invest in 5 year bonds that are currently priced at $850.00. The bonds have a coupon rate of 10 percent and semiannual coupon payments. If the par value of the bonds is $1,000, what is the bond’s effective annual yield (EAY)?5 points QUESTION 20You own a 5 year bond with a face value of $1,000 and a coupon rate of 5 percent with annual payments. The bond is currently worth $810.46. If market interest rates remain unchanged, what will be the value of the bond next year when there are 4 years left until maturity?