Question 1

The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value

Accepted Answer

A)   Equal to or greater than par plus one year's interest.
B)   Equal to par.
C)   Equal to par less one year's interest.
D)   Less than par.
E)   Five percent over par.F) B) and E)
G) None of the above

Question 2

According to the liquidity preference hypothesis yield curves generally slope upward because

Accepted Answer

A)   investors prefer short maturity obligations to long maturity obligations.
B)   investors prefer long maturity obligations to short maturity obligations.
C)   investors prefer less volatile long maturity obligations.
D)   investors prefer more volatile short maturity obligations.
E)   none of the above.F) A) and C)
G) D) and E)

Question 3

The realized yield measures the expected rate of return of a bond that you expect to sell prior to its maturity.

Accepted Answer

A) True 
 B)False

Question 4

There is an inverse relationship between duration and coupon.

Accepted Answer

A) True 
 B)False

Question 5

Suppose you have a 12%,20 year bond traded at $850.If it is callable in 5 years at $1,100,what is the bond's yield to call? Interest is paid semiannually.

Accepted Answer

A)   8%
B)   9.0%
C)   18.0%
D)   9.4%
E)   16.5%F) B) and C)
G) A) and D)

Question 6

Consider a 15%,20 year bond that pays interest annually,and its current price is $850.What is the promised yield to maturity?

Accepted Answer

A)   10.23%
B)   18.45%
C)   2.31%
D)   17.77%
E)   9.26%F) A) and B)
G) C) and D)

Question 7

Assume that you purchase a 5-year $1,000 par value bond,with a 6% coupon,and a yield of 7%.Immediately after you purchase the bond,yields rise to 8% and remain at that level to maturity.Calculate the realized horizon yield if you hold the bond to maturity.Interest is paid annually.

Accepted Answer

A)   6.0%
B)   7.11%
C)   8.0%
D)   15.25%
E)   8.18%F) All of the above
G) C) and E)

Question 8

Suppose the current 7 year rate is 8% and the current 6 year rate is 6%.What is the one year forward rate for six years?

Accepted Answer

A)   16.33%
B)   18.22%
C)   20.82%
D)   14.65%
E)   15.14%F) B) and D)
G) A) and C)

Question 9

Estimating forward rates from the spot rate curve is based on the assumption that the ____ hypothesis accurately describes the shape of the yield curve.

Accepted Answer

A)   Expectations
B)   Liquidity preference
C)   Segmented market
D)   Efficient market
E)   None of the aboveF) A) and E)
G) A) and B)

Exam 18: The Analysis and Valuation of Bonds

According to the liquidity preference hypothesis yield curves generally slope upward because

Correct Answer
verified

The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value

Correct Answer
verified

Suppose you have a 12%,20 year bond traded at $850.If it is callable in 5 years at $1,100,what is the bond's yield to call? Interest is paid semiannually.

Correct Answer
verified

Assume that you purchase a 5-year $1,000 par value bond,with a 6% coupon,and a yield of 7%.Immediately after you purchase the bond,yields rise to 8% and remain at that level to maturity.Calculate the realized horizon yield if you hold the bond to maturity.Interest is paid annually.

Correct Answer
verified

Estimating forward rates from the spot rate curve is based on the assumption that the ____ hypothesis accurately describes the shape of the yield curve.

Correct Answer
verified

The realized yield measures the expected rate of return of a bond that you expect to sell prior to its maturity.

Correct Answer
verified

There is an inverse relationship between duration and coupon.

Correct Answer
verified

Suppose the current 7 year rate is 8% and the current 6 year rate is 6%.What is the one year forward rate for six years?

Correct Answer
verified

Consider a 15%,20 year bond that pays interest annually,and its current price is $850.What is the promised yield to maturity?

Correct Answer
verified

Exam 18: The Analysis and Valuation of Bonds

According to the liquidity preference hypothesis yield curves generally slope upward because

Correct AnswerverifiedShow Answer

The yield to call is a more conservative yield measure whenever the price of a callable bond is quoted at a value

Correct AnswerverifiedShow Answer

Suppose you have a 12%,20 year bond traded at $850.If it is callable in 5 years at $1,100,what is the bond's yield to call? Interest is paid semiannually.

Correct AnswerverifiedShow Answer

Assume that you purchase a 5-year $1,000 par value bond,with a 6% coupon,and a yield of 7%.Immediately after you purchase the bond,yields rise to 8% and remain at that level to maturity.Calculate the realized horizon yield if you hold the bond to maturity.Interest is paid annually.

Correct AnswerverifiedShow Answer

Estimating forward rates from the spot rate curve is based on the assumption that the ____ hypothesis accurately describes the shape of the yield curve.

Correct AnswerverifiedShow Answer

The realized yield measures the expected rate of return of a bond that you expect to sell prior to its maturity.

Correct AnswerverifiedShow Answer

There is an inverse relationship between duration and coupon.

Correct AnswerverifiedShow Answer

Suppose the current 7 year rate is 8% and the current 6 year rate is 6%.What is the one year forward rate for six years?

Correct AnswerverifiedShow Answer

Consider a 15%,20 year bond that pays interest annually,and its current price is $850.What is the promised yield to maturity?

Correct AnswerverifiedShow Answer

Correct Answer
verified

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