Bond Valuation Questions
LECTURE 7
BOND VALUATION CLASS QUESTIONS
Information for 1 & 2
Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Price A 1 $909.09 B 2 $811.62 C 3 $711.78 D 4 $635.52
1). The yield to maturity on bond A is .
a. 10% b. 11% c. 12% d. 14% e. none of the above
2). The yield to maturity on bond C is .
a. 10% b. 11% c. 12% d. 14% e. none of the above
3). 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. 6.00% b. 8.33% c. 9.00% d. 45.00%
4). 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 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 increase 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
5). 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 General Motors due in 5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued by Exxon and General Motors, 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%
BOND VALUATION CLASS QUESTIONS
Information for 1 & 2
Consider the following $1,000 par value zero-coupon bonds: Bond Years to Maturity Price A 1 $909.09 B 2 $811.62 C 3 $711.78 D 4 $635.52
1). The yield to maturity on bond A is .
a. 10% b. 11% c. 12% d. 14% e. none of the above
2). The yield to maturity on bond C is .
a. 10% b. 11% c. 12% d. 14% e. none of the above
3). 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. 6.00% b. 8.33% c. 9.00% d. 45.00%
4). 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 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 increase 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
5). 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 General Motors due in 5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued by Exxon and General Motors, 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%