Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Corporate Finance Expert

problem 1: When pricing bonds, if a bond’s coupon rate is less than the required rate of return, then:

a) The bond sells at a discount if it has a long maturity, a premium if it has a short maturity.
b) The holder of the bond (the investor) is assured of a profit when the bond is sold regardless of when it was purchased.
c) The bond sells at par as the required rate of return is adjusted to reflect the discrepancy.
d) The bond sells at a premium if it has a long maturity, a discount if it has a short maturity.
e) A portion of the income a buyer of this bond will receive comes from buying the bond at less than the par value.

problem 2: Which of the given doesn’t correctly complete this sentence: In general, bond yields increase as investors demand compensation for ________.

a) Default risk.
b) Interest rate risk.
c) Increased liquidity.
d) Increases in the real rate of interest.
e) Increases in expected future inflation.

problem 3: A bond with an annual coupon rate of $100 originally sold at par for $1,000. The current market interest rate on this bond is 9%. Supposing no change in risk, this bond would sell at a _______ in order to compensate _______.

a) Premium; the purchaser for the above market coupon rate.
b) Discount; the purchaser for the above market coupon rate.
c) Premium; the seller for the above market coupon rate.
d) Discount; the seller for the above market coupon rate.
e) Discount; the issuer for the higher cost of borrowing.

problem 4: A bond sold five weeks ago for $1,100. The bond is worth $1,050 in today’s market.  Supposing no changes in risk, which of the given is true?

a) Interest rates must be lower now than they were five weeks ago.
b) The coupon payment of the bond must have increased.
c) The face value of the bond should be $1,100.
d) The bond’s present yield has risen from five weeks ago.
e) The bond should be within one year of maturity.

problem 5: Which of the given is a true statement?

I. All else equal, the value of a perpetual bond will remain unchanged from one year to the next unless market interest rates change.
II. All else equal, bond prices and coupon prices are inversely related.
III. All else equal, given two bonds identical however for coupon, the market price of the lower coupon bond will change more (in percentage terms) than that of the higher coupon bond for a given change in market interest rates.

a) I and II only.
b) I, II, and III.
c) I and III only.
d) II and III only.
e) I only.

problem 6: Which of the given is a basic component which affects the slope of the term structure of interest rates?

a) Liquidity premium.
b) Taxability premium.
c) Real rate of interest.
d) Default risk premium.
e) Inflation premium.

problem 7: What is the market value of a bond which will pay a total of 40 semiannual coupons of $50 each over the remainder of its life? Suppose the bond has a $1,000 face value and an 8% yield to maturity.

a) $1,215.62
b) $1,135.90
c) $634.86
d) $1,197.93
e) $642.26

problem 8: The market price of a bond is $1,236.94; it has 14 years to maturity, a $1,000 face value and pays an annual coupon of $100. What is its yield to maturity?

a) 3.18%
b) 7.25%
c) 6.11%
d) 4.26%
e) 5.37%

problem 9: As a corporate treasurer, you manage a $100 million bond portfolio. Economists propose (and you agree) that market interest rates are headed up over the next some months. To decrease interest rate risk, you must attempt to:

I) Decrease the average maturity of the portfolio by selling long-term bonds and buying short-term bonds.
II) Lengthen the average maturity of the portfolio by buying long-term bonds and selling short-term bonds.
III) Decrease the average coupon rate by selling high coupon bonds and buying low coupon bonds.
IV) Raise the average coupon rate by buying high coupon bonds and selling low coupon bonds.

a) I, II, III, and IV.
b) I only.
c) II and III only.
d) I and IV only.
e) I and II only.

problem 10: ABC Company’s preferred stock is selling for $25 per share. This is expected that the company will pay its constant preferred dividend in perpetuity. If the required rate of return is 12%, what will be the dividend two years from now?

a) $2.50
b) $2.39
c) $3.30
d) $3.76
e) $3.00

Corporate Finance, Finance

  • Category:- Corporate Finance
  • Reference No.:- M93690

Have any Question? 


Related Questions in Corporate Finance

1 personal financial statements describe how wealth is

1. Personal Financial Statements. Describe how wealth is built over time. How do your personal cash flow statement and your personal balance sheet assist in this process? 2. Economic Impact on Asset Values. Explain in lo ...

Ethical dilemma sandy and phil have recently married and

Ethical Dilemma. Sandy and Phil have recently married and are both in their early 20s. In establishing their financial goals, they determine that their three long-term goals are to purchase a home, to provide their child ...

Ethanol c2h5oh flows in a thin film down the outside

Ethanol, C2H5OH, flows in a thin film down the outside surface of an inclined plane, 2 m wide and 4 m long. The liquid temperature is 289 K. Ethanol-free air at 303 K and 1 atm flows across the width of the plate paralle ...

Prepare a presentation to a brazilian audiencethe manager

Prepare a presentation to a Brazilian audience. The manager of a Brazilian bank has approached your school about the possibility of sending 30 of its managers to your institution to pursue a three-month intensive course ...

Differentiate between the different levels of business

Differentiate between the different levels of business concentration created by mergers. Explain how the changing business environment has caused an evolution in the classification of concentration from the original FTC ...

1 differentiate between a us commercial bank and the

1. Differentiate between a U.S. commercial bank and the merchant banks found in other developed countries. How have these differences affected the securities markets in the United States versus those in other developed c ...

Review the assigned companys financial statements from the

Review the assigned company's financial statements from the past three years. Company assigned: Nike, symbol NKE. Calculate the financial ratios for the assigned company's financial statements, and then interpret those r ...

1 your financial position name some factors that might

1. Your Financial Position. Name some factors that might affect your current financial position. 2. Financial Goals and Planning. How do your current financial position and goals relate to your creation of alternative fi ...

Practice an active listening responsefor each of the

Practice an active listening response. For each of the following statements, write down three responses: one that repeats the content, one that paraphrases the content, and one that refl ects both the content and the pos ...

Write a thank-you emailimagine that you had a great

Write a thank-you email. Imagine that you had a great interview for your ideal job. Write a thank-you email to your interviewer to reinforce your interest in the position and your qualifications. Send the email to your i ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen