please answer the questions

FIN 3343

Chapter 7 Homework Name__________________________

Please select the best choice from the answer choices given.

1. Which of the following is NOT a type of long-term debt?

   1. mortgage bonds

   2. debentures

   3. debenture bonds

   4. commercial paper

1. What is the current price of a bond issued by Dundee International which pays a semiannual coupon rate of 6 8/9%? The bond matures in 5 years and the required return on investments of similar risk is 6.5%.

1. Maxine Corp has a 5 1/8% coupon bond outstanding in 2004. The bond matures on April 1 in the maturity year. Suppose an investor bought this bond on April 1, 1999 and assume that interest is paid annually on April 1. Calculate the yield-to-maturity assuming the investor buys the bond at 105, as quoted in the financial press.

1. A “junk bond” is a term used to describe a bond that

   1. is in default

   2. is rated Ba or lower

   3. is currently paying interest

   4. has been downgraded by Moody’s

1. _____________________________are not secured by specific assets.

1. Determine the expected inflation rate if the nominal rate of return is 10% and the real rate of return is 7%.

1. You just purchased a bond for 99.35. It matures in 12 years and pays a coupon of 8 3/7% semiannually. What return can you expect to earn if you hold it until maturity?

1. The ____ the investor's required rate of return on a bond, the ____ will be the value of the bond to the investor.

1. A sinking fund allows the issuer to

1. How many years are left until maturity of a bond that is selling for $916.95? The coupon rate of the bond is 8 percent, interest is payable semiannually, and the current market rate of return on a similar risk bond is 10 percent.