Finance: Bonds
Managerial Finance
Chapter 5, Quiz
Name: Emily Smith
Multiple Choice: Please circle the correct answer choice
. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? a. The company’s bonds are downgraded. b. Market interest rates rise sharply. c. Market interest rates decline sharply. d. The company 's financial situation deteriorates significantly. e. Inflation increases significantly. . A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? a. If the yield to maturity remains constant, the bond’s price one year from now will be higher than its current price. b. The bond is selling below its par value. c. The bond is selling at a discount. d. If the yield to maturity remains constant, the bond’s price one year from now will be lower than its current price. e. The bond’s current yield is greater than 9%.
. Which of the following bonds would have the greatest percentage increase in value if all interest rates fall by 1%? a. 10-year, zero coupon bond. b. 20-year, 10% coupon bond. c. 20-year, 5% coupon bond. d. 1-year, 10% coupon bond. e. 20-year, zero coupon bond.
. Which of the following bonds has the greatest interest rate price risk? a. A 10-year $100 annuity. b. A 10-year, $1,000 face value, zero coupon bond. c. A 10-year, $1,000 face value, 10% coupon bond with annual interest payments. d. All 10-year bonds have the same price risk since they have the same maturity. e. A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.
. If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value? a. A 1-year zero coupon bond. b. A 1-year bond with an 8% coupon. c. A 10-year bond with an 8% coupon. d. A 10-year bond
Chapter 5, Quiz
Name: Emily Smith
Multiple Choice: Please circle the correct answer choice
. Which of the following events would make it more likely that a company would choose to call its outstanding callable bonds? a. The company’s bonds are downgraded. b. Market interest rates rise sharply. c. Market interest rates decline sharply. d. The company 's financial situation deteriorates significantly. e. Inflation increases significantly. . A 10-year bond with a 9% annual coupon has a yield to maturity of 8%. Which of the following statements is CORRECT? a. If the yield to maturity remains constant, the bond’s price one year from now will be higher than its current price. b. The bond is selling below its par value. c. The bond is selling at a discount. d. If the yield to maturity remains constant, the bond’s price one year from now will be lower than its current price. e. The bond’s current yield is greater than 9%.
. Which of the following bonds would have the greatest percentage increase in value if all interest rates fall by 1%? a. 10-year, zero coupon bond. b. 20-year, 10% coupon bond. c. 20-year, 5% coupon bond. d. 1-year, 10% coupon bond. e. 20-year, zero coupon bond.
. Which of the following bonds has the greatest interest rate price risk? a. A 10-year $100 annuity. b. A 10-year, $1,000 face value, zero coupon bond. c. A 10-year, $1,000 face value, 10% coupon bond with annual interest payments. d. All 10-year bonds have the same price risk since they have the same maturity. e. A 10-year, $1,000 face value, 10% coupon bond with semiannual interest payments.
. If its yield to maturity declined by 1%, which of the following bonds would have the largest percentage increase in value? a. A 1-year zero coupon bond. b. A 1-year bond with an 8% coupon. c. A 10-year bond with an 8% coupon. d. A 10-year bond