BUS 405 Week 3 Chapter 10 Bond Prices and Yields

This paperwork of BUS 405 Week 3 Chapter 10 Bond Prices and Yields contains:

1. Which one of the following is the correct definition of a coupon rate?

2. What is the annual interest divided by the market price of a bond called?

3. The yield to maturity is the:

4. A premium bond is defined as a bond that:

5. A discount bond:

6. The price of a bond, net of accrued interest, is referred to as the bond's:

7. The dirty price of a bond is the:

8. A callable bond:

9. Which one of the following does an issuer pay to redeem a bond prior to maturity?

10. Which one of the following prices is equal to the present value of a bond's future cash flows and is paid when a bond is redeemed prior to maturity?

11. An issuer has a bond outstanding that matures in 18 years. Which one of the following prevents the issuer from buying back that bond today?

12. The yield that a bond will earn given that it is bought back by the issuer at the earliest possible date is the:

13. Which one of the following is the risk that market interest rates may increase causing the price of a bond to decline?

14. The rate of return an investor actually earns from owning a bond is called which one of the following?

15. Which one of the following measures a bond's sensitivity to changes in market interest rates?

16. A change in a bond's price caused by which one of the following is defined as the dollar value of an 01?

17. The yield value of a 32nd is the change needed in which one of the following to cause a bond's price to change by 1/32nd?

18. A dedicated portfolio is a bond portfolio created to:

19. Which one of the following risks is associated with investing a coupon payment at a rate that is lower than the bond's yield-to-maturity?

20. Which one of the following involves creating a portfolio in a manner which minimizes the uncertainty of the portfolio's maturity target date value?

21. Price risk is the risk that:

22. Periodically rebalancing a portfolio so that the duration continues to match the target date is called:

23. A basic bond that has a face value of $1,000 and pays regular semiannual coupon payments is referred to as which one of the following?

24. Which of the following will increase if the coupon rate increases?

I. face value

II. market value

III. yield-to-maturity

IV. current yield

25. Which one of the following will decrease the current yield of a bond?

26. Which one of the following will occur if a bond's discount rate is lowered?

27. Which one of the following statements is correct concerning premium bonds?

28. Which one of the following statements is correct concerning discount bonds?

29. Which one of the following statements applies to a par value bond?

30. Assuming there is no default risk, both a premium bond and a discount bond must share which one of the following characteristics?

31. A bond has a current yield that is equal to the yield-to-maturity. Given this, which one of the following must also be true?

32. For a premium bond, the:

33. Davis Industrial bonds have a current market price of $990 and a 6 percent coupon. The bonds pay interest semi-annually on March 1 and September 1. Assume today is January 1. How many months of accrued interest are included in the dirty price of these bonds?

34. A bond pays interest semiannually on February 1 and August 1. Assume today is October 1. How many months of accrued interest are included in the clean price of this bond?

35. The yield-to-maturity assumes which one of the following?

36. Which one of the following increases the probability that a bond will be called?

37. Which one of the following statements is correct concerning a callable bond that is currently selling below face value? Assume there is no risk of default. Also assume the issuer only calls bonds when they can be refinanced at a lower rate of interest.

38. Which one of the following statements is correct?

39. According to Malkiel's theorems, bond prices and bond yields are:

40. Which combination of bond characteristics causes a bond to be most sensitive to changes in market interest rates?

I. low coupon rates

II. high coupon rates

III. short time to maturity

IV. long time to maturity

41. How does the size of the change in a bond's price react in response to a given change in the yield to maturity as the time to maturity increases?

42. Which one of the following statements is correct according to Malkiel's Theorems?

43. Which one of the following must be equal for two bonds if they are to have similar changes in their prices given a relatively small change in bond yields?

44. All else constant, which of the following will decrease the Macaulay duration of a straight bond?

I. reducing the coupon payment

II. shortening the time to maturity

III. lowering the yield to maturity

45. Which one of the following statements is correct concerning Macaulay duration?

46. The modified duration:

47. To immunize your portfolio, you should:

48. Last year, you created an immunized portfolio with an average maturity date of 14.5 years, a yield-tomaturity of 9.8 percent, and a duration of 9.6 years. According to the policy of dynamic immunization, you should now modify your portfolio in which one of the following ways?

49. Dynamic immunization is primarily aimed at reducing which one of the following risks?

50. A bond pays semiannual interest payments of $37.50. What is the coupon rate if the par value is $1,000?

51. A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is your annual interest payment if you own 8 of these bonds?

52. A bond has a par value of $1,000 and a coupon rate of 6 percent. What is the dollar amount of each semiannual interest payment if you own 6 of these bonds?

53. A bond has a par value of $1,000, a market price of $1,012, and a coupon rate of 5.75 percent. What is the current yield?

54. A 6.5 percent coupon bond has a face value of $1,000 and a current yield of 6.61 percent. What is the current market price?