1 The following entities issue bonds to engage in long-term borrowing except a. the federal government. state and local governments. corporations.

1

The following entities issue bonds to engage in long-term borrowing except

a. the federal government.

b. state and local governments.

c. corporations.

d. individuals

2

If a bond pays interest semiannually, then it pays interest

a. once per year.

b. every six months.

c. every three months.

d. every two years.

3

A four-year bond has an 8 percent coupon rate and a face value of $1,000. If the current price of the bond is $878.31, calculate the yield to maturity of the bond (assuming annual interest payments).

a. 8 percent

b. 10 percent

c. 12 percent

d. 6 percent

4.

A bond has a face value of $1,000, a coupon rate of 0 percent, yield to maturity of 9 percent, and 10 years to maturity. This bond's duration is

a. 6.7 years.

b. 7.5 years.

c. 9.6 years.

d. 10.0 years.

5.

One can best describe the term structure of interest rates as the relationship between

a. spot interest rates and bond prices.

b. spot interest rates and stock prices.

c. spot interest rates and time.

d. yields of coupon bonds and their maturity.