Question: A firm has bonds on the market with 13 years to maturity, a YTM of 7.6 percent, and a current price of $901.98. The bonds make semiannual payments and have a face value of $1,000. What is the coupon rate?
Answer Options:
6.40%
6.33%
6.60%
6.67%
6.50%
Answer: A — 6.40%
Question: A newly issued 10-year, $1,000 face value zero coupon bond just sold for $311.05. What is the implicit interest, in dollars, for the first year of the bond’s life? Assume semiannual compounding.
Answer Options:
$47.72
$38.53
$41.47
$57.63
$45.89
Answer: B — $38.53
Question: A firm wants to raise $31.3 million to expand its business. To accomplish this, it plans to sell 15-year, $1,000 face value zero coupon bonds. The bonds will be priced to yield 5.75 percent. What is the minimum number of bonds it must sell to raise the money it needs? Assume semiannual compounding.
Answer Options:
80,411
69,800
74,907
86,029
73,225
Answer: None of the listed choices is exact; the math gives 73,256 bonds. Closest listed: E — 73,225
Question: A firm’s zero coupon bonds have a market price of $318.46, a face value of $1,000, and a yield to maturity of 6.69 percent. How many years is it until these bonds mature? Assume semiannual compounding.
Answer Options:
34.78 years
32.28 years
17.39 years
24.01 years
16.14 years
Answer: C — 17.39 years
Question: A Treasury bond is quoted as 99.6325 asked and 99.1250 bid. What is the bid-ask spread in dollars on a $10,000 face value bond?
Answer Options:
$25.38
$5.75
$5.08
$50.75
$2.54
Answer: D — $50.75
Question: A bond has an invoice price of $1,119, a coupon rate of 6.25 percent, a face value of $1,000, and there are four months to the next semiannual coupon date. What is the clean price of this bond?
Answer Options:
$1,108.58
$1,052.17
$1,114.14
$1,087.75
$1,083.50
Answer: A — $1,108.58
Question: A bond yielded 6.21 percent last year. The inflation rate for the same period was 3.52 percent. What was the actual real rate of return?
Answer Options:
9.75%
2.60%
9.95%
5.63%
13.20%
Answer: B — 2.60%
Question: A firm’s outstanding bonds provide a real rate of return of 3.6 percent. If the current rate of inflation is 2.68 percent, what is the actual nominal rate of return on these bonds?
Answer Options:
7.58%
7.33%
7.71%
6.76%
6.38%
Answer: E — 6.38%
Question: The yield to maturity on a bond is currently 8.76 percent. The real rate of return is 4.48 percent. What is the rate of inflation?
Answer Options:
4.10%
5.64%
7.24%
12.04%
13.63%
Answer: A — 4.10%
Question: A firm has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders? The right to:
Answer Options:
share in company profits prior to other shareholders
elect the corporate directors
vote on proposed mergers
receive all residual income after the common dividends have been paid
be granted a permanent seat on the board of directors
Answer: A — share in company profits prior to other shareholders
Question: A 12-year bond with a face value of $1,000 has a 5.8 percent coupon rate and pays interest semiannually. If the yield to maturity is 6.4 percent, what is the bond’s price?
Answer Options:
$950.27
$1,026.60
$892.89
$1,078.88
$928.91
Answer: A — $950.27