Objective type questions on Bond investment and interest rates
1. In inflations is expected to decrease in the future, the graph depicting the term structure of interest rates will be-
- Upward-slopping
- flat
- humped
- downward-slopping
- double-humped
2. Which one of the following rates is the best measure of the increased purchasing power you can realize from a bond investment?
- current yield
- nominal rate
- real rate
- yield to maturity
- yield to call
3. Which one of the following bonds tends to be the most interest rate sensitive?
- 20-year, zero coupon bond
- a 20-year, 9 percent coupon bond
- a 5-year, zero coupon bond
- a 1-year, zero coupon bond
- a 1-year, 9 percent coupon bond
4. An interest rate that has been adjusted for inflation is called a _______ rat
- deflated
- coupon
- nominal
- real
- premium
5. A deep discount bond that pays no regular interest payment is called a(an) _______ bon
- exotic
- income
- zero coupon
- convertible
- put
6. Candy and Cookies pays a constant annual dividend of $1.30 per shar How much are you willing to pay for one share if you require a 12 percent rate of return?
- $9.2
- $10.8
- $12.1
- $13.5
- $15.6
7. Winslow and Daughters just paid their annual dividend of $2.2 a share. They recently announced that all future dividends will increase by 2 percent annually. What is one share of this stock worth to you if you require a 14 percent rate of return?
- $18.27
- $18.33
- $18.14
- $18.70
- $18.87
8. The common stock of Wetmore Industries in valued at $10.08 a share. The company increases their dividend by 3.5 percent annually and expects their next dividend to be $1.24. What is the required rate of return on this stock?
- 15.8
- 16.23
- 16.35
- 16.49
- 16.53
9. A stock pays a $.80 dividend and has a market price of $20.40 a share. What is the dividend yield?
- 1.63
- 1.96
- 2.14
- 3.26
- 3.92
10. A preferred stock sells for $66.08 a share and has a market return of 11.35%. What is the dividend amount?
- $5.82
- $6.17
- $6.40
- $7.25
- $7.50