Question 1

Potential sellers of an asset can be represented as a ____ schedule showing the ____ prices at which they are willing to sell given quantities of the asset.

Accepted Answer

A)   supply, maximum
B)   demand, maximum
C)   supply, minimum
D)   supply, averageE) All of the above
F) A) and B)

Question 2

Unsecured income bonds are considered ________________securities.

Accepted Answer

A)   strong
B)   government
C)   weak
D)   non-corruptibleE) A) and C)
F) A) and B)

Question 3

National Medical has a zero coupon bond outstanding that sells for $242.60 and has 15 years to maturity. What is the yield to maturity on the bond to the nearest tenth of one percent?

Accepted Answer

A)   10.5%
B)   9.1%
C)   9.9%
D)   11.0%E) A) and D)
F) C) and D)

Question 4

What is the yield-to-maturity of an Acme bond selling for $1107.50 with 5 years to maturity, a 12 1/2% coupon, and semi-annual compounding?

Accepted Answer

A)   10.36%
B)   11.29%
C)   9.74%
D)   10.20%E) B) and D)
F) A) and B)

Question 5

The value of a 15-year bond will change ____ for a given change in the required rate of return than the value of a 5 year bond.

Accepted Answer

A)   more
B)   less
C)   the same percentage
D)   exactly the sameE) A) and B)
F) B) and C)

Question 6

Users of preferred stock include:

Accepted Answer

A)   Utility companies
B)   Acquiring firm in mergers and acquisitions
C)   Large commercial banks
D)   All of the above are usersE) A) and B)
F) All of the above

Question 7

Marko needs to raise capital through a zero-coupon bond debt offering. If the bonds will have 12 years to maturity and the rate of return on a bond in Marko's risk class is 11 percent, what will be the selling price of the bond?

Accepted Answer

A)   $302.50
B)   $335.50
C)   $269.50
D)   $286.00E) A) and C)
F) B) and D)

Question 8

"Junk bond" is a term used to describe a bond that

Accepted Answer

A)   is in default
B)   is rated Ba or lower
C)   is currently paying interest
D)   has been downgraded by Moody'sE) A) and B)
F) C) and D)

Question 9

The State of Adaven issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5%. Determine the value of these bonds today to an investor who requires a 10% return on his investment.

Accepted Answer

A)   $25
B)   $5
C)   $10
D)   $50E) None of the above
F) B) and C)

Question 10

All of the following types of bonds are secured except

Accepted Answer

A)   collateral trust
B)   mortgage
C)   debentures
D)   equipment trust certificatesE) A) and B)
F) A) and C)

Question 11

What would a GMA 6% coupon bond maturing in 14 years sell (approximately)  for if the current yield is 6.8633% and the yield-to-maturity is 7.48%?

Accepted Answer

A)   $950.20
B)   $920.02
C)   $1051.54
D)   $874.21E) None of the above
F) A) and B)

Question 12

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?

Accepted Answer

A)   $607.72
B)   $692.00
C)   $1,000
D)   $1,080E) None of the above
F) B) and C)

Question 13

In reading price quotes on U.S. Treasury bills, you would ____ expect to find the "asked" price higher than the "bid".

Accepted Answer

A)   always
B)   never
C)   sometimes
D)   seldomE) B) and D)
F) A) and D)

Question 14

In the Treasury bill quote that follows, the price of the bill can be calculated from the ____ price.

Accepted Answer

A)   bid
B)   asked
C)   yield
D)   none of the aboveE) A) and D)
F) A) and C)

Question 15

How does a firm value an asset?

Accepted Answer

The value of any asset is based on the e...

Question 16

The quality of a debenture depends on the

Accepted Answer

A)   general credit-worthiness of the issuing company
B)   value of the assets used as collateral
C)   the coupon rate of the debenture
D)   length of time to maturityE) A) and C)
F) A) and D)

Question 17

What is the collateral used in collateral trust bonds and who is its primary user?

Accepted Answer

Collateral trust bonds are backed by sto...

Question 18

The call feature is an advantage to the issuing firm

Accepted Answer

A)   if the bond has a floating rate
B)   if interest rates decline
C)   if the bond has a low par value
D)   if interest rates increaseE) A) and D)
F) None of the above

Question 19

Zero coupon bonds are an example of

Accepted Answer

A)   original issue deep discount bonds
B)   extendible notes
C)   convertible bonds
D)   floating rate notesE) A) and C)
F) B) and D)

Question 20

What is the yield to maturity for a Poughkeepsie Gypsy Fortune Tellers' zero coupon bond that matures in 14 years if the bond is selling for $530.00?

Accepted Answer

A)   5.84%
B)   4.64%
C)   4.28%
D)   5.49%E) A) and C)
F) B) and C)

Exam 6: Fixed Income Securities: Characteristics and Valuation

Zero coupon bonds are an example of

Correct AnswerverifiedShow Answer

Potential sellers of an asset can be represented as a ____ schedule showing the ____ prices at which they are willing to sell given quantities of the asset.

Correct AnswerverifiedShow Answer

All of the following types of bonds are secured except

Correct AnswerverifiedShow Answer

Marko needs to raise capital through a zero-coupon bond debt offering. If the bonds will have 12 years to maturity and the rate of return on a bond in Marko's risk class is 11 percent, what will be the selling price of the bond?

Correct AnswerverifiedShow Answer

What is the collateral used in collateral trust bonds and who is its primary user?

Correct AnswerverifiedCollateral trust bonds are backed by sto...View AnswerShow Answer

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?

Correct AnswerverifiedShow Answer

In reading price quotes on U.S. Treasury bills, you would ____ expect to find the "asked" price higher than the "bid".

Correct AnswerverifiedShow Answer

How does a firm value an asset?

Correct AnswerverifiedThe value of any asset is based on the e...View AnswerShow Answer

The quality of a debenture depends on the

Correct AnswerverifiedShow Answer

"Junk bond" is a term used to describe a bond that

Correct AnswerverifiedShow Answer

What is the yield to maturity for a Poughkeepsie Gypsy Fortune Tellers' zero coupon bond that matures in 14 years if the bond is selling for $530.00?

Correct AnswerverifiedShow Answer

National Medical has a zero coupon bond outstanding that sells for $242.60 and has 15 years to maturity. What is the yield to maturity on the bond to the nearest tenth of one percent?

Correct AnswerverifiedShow Answer

Unsecured income bonds are considered ________________securities.

Correct AnswerverifiedShow Answer

The value of a 15-year bond will change ____ for a given change in the required rate of return than the value of a 5 year bond.

Correct AnswerverifiedShow Answer

What is the yield-to-maturity of an Acme bond selling for $1107.50 with 5 years to maturity, a 12 1/2% coupon, and semi-annual compounding?

Correct AnswerverifiedShow Answer

Users of preferred stock include:

Correct AnswerverifiedShow Answer

The call feature is an advantage to the issuing firm

Correct AnswerverifiedShow Answer

What would a GMA 6% coupon bond maturing in 14 years sell (approximately) for if the current yield is 6.8633% and the yield-to-maturity is 7.48%?

Correct AnswerverifiedShow Answer

In the Treasury bill quote that follows, the price of the bill can be calculated from the ____ price.

Correct AnswerverifiedShow Answer

The State of Adaven issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5%. Determine the value of these bonds today to an investor who requires a 10% return on his investment.

Correct AnswerverifiedShow Answer

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Potential sellers of an asset can be represented as a schedule showing the prices at which they are willing to sell given quantities of the asset.

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Collateral trust bonds are backed by sto...
View Answer

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The value of any asset is based on the e...
View Answer

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