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Exam 10: Bond Prices and Yields

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Question 51

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Consider the following $1,000 par value zero-coupon bonds: The expected 1-year interest rate 4 years from now should be ________.

A) 16%
B) 18%
C) 20%
D) 22%

E) All of the above
F) B) and C)

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Question 52

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A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is ________.

A) 6%
B) 6.58%
C) 7.2%
D) 8%

E) A) and B)
F) B) and C)

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Question 53

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The yield to maturity of a 10-year zero-coupon bond with a par value of $1,000 and a market price of $625 is ________.

A 1% decline in yield will have the least effect on the price of a bond with a ________.

A Treasury bond due in 1 year has a yield of 6.3%, while a Treasury bond due in 5 years has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corp. has a yield of 9.6%, while a bond due in 1 year issued by High Country Marketing Corp. has a yield of 6.8%. The default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp. are, respectively, ________ and ________.

A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5 years, and is selling today at an $84.52 discount from par value. The yield to maturity on this bond is ________.

Yields on municipal bonds are typically ________ yields on corporate bonds of similar risk and time to maturity.

On May 1, 2007, Joe Hill is considering one of the following newly issued 10-year AAA corporate bonds. If the volatility of interest rates is expected to increase, then Joe Hill should ________.

You purchased a 5-year annual-interest coupon bond 1 year ago. Its coupon interest rate was 6%, and its par value was $1,000. At the time you purchased the bond, the yield to maturity was 4%. If you sold the bond after receiving the first interest payment and the bond's yield to maturity had changed to 3%, your annual total rate of return on holding the bond for that year would have been approximately ________.

Sinking funds are commonly viewed as protecting the ________ of the bond.

Which country experienced the largest-ever sovereign default in 2012?

If the quote for a Treasury bond is listed in the newspaper as 99.25 bid, 99.26 ask, the actual price at which you can sell this bond given a $10,000 par value is ________.

A collateral trust bond is ________.

________ are examples of synthetically created zero-coupon bonds.

$1,000 par value zero-coupon bonds (ignore liquidity premiums) The expected 1-year interest rate 1 year from now should be about ________.

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest 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 14%, ________.