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财务管理CHAPTER
CHAPTER7
InterestRatesandBondValuation
II.CONCEPTS
BONDFEATURES
d36.Abondwitha7percentcouponthatpaysinterestsemi-annuallyandispricedatparwillhaveamarketpriceof_____andinterestpaymentsintheamountof_____each.
a.$1,007;$70
b.$1,070;$35
c.$1,070;$70
d.$1,000;$35
e.$1,000;$70
BONDPRICESANDYIELDS
e37.Allelseconstant,abondwillsellat_____whentheyieldtomaturityis_____thecouponrate.
a.apremium;higherthan
b.apremium;equalto
c.atpar;higherthan
d.atpar;lessthan
e.adiscount;higherthan
BONDPRICESANDYIELDS
d38.Allelseconstant,acouponbondthatissellingatapremium,musthave:
a.acouponratethatisequaltotheyieldtomaturity.
b.amarketpricethatislessthanparvalue.
c.semi-annualinterestpayments.
d.ayieldtomaturitythatislessthanthecouponrate.
e.acouponratethatislessthantheyieldtomaturity.
BONDPRICES
c39.Themarketpriceofabondisequaltothepresentvalueofthe:
a.facevalueminusthepresentvalueoftheannuitypayments.
b.annuitypaymentsplusthefuturevalueofthefaceamount.
c.facevalueplusthepresentvalueoftheannuitypayments.
d.facevalueplusthefuturevalueoftheannuitypayments.
e.annuitypaymentsminusthefacevalueofthebond.
BONDPRICES
a40.Astheyieldtomaturityincreases,the:
a.amounttheinvestoriswillingtopaytobuyabonddecreases.
b.longerthetimetomaturity.
c.lowerthecouponratedesiredbythatinvestor.
d.higherthepricetheinvestorofferstobuyabond.
e.lowertherateofreturndesiredbytheinvestor.
SEMIANNNUALBONDS
e41.AmericanFortunesispreparingabondofferingwithan8percentcouponrate.The
bondswillberepaidin10years.Thecompanyplanstoissuethebondsatparvalueandpayinterestsemiannually.Giventhis,whichofthefollowingstatementsarecorrect?
I.Theinitialsellingpriceofeachbondwillbe$1,000.
II.Afterthebondshavebeenoutstandingfor1year,youshoulduse9asthenumberofcompoundingperiodswhencalculatingthemarketvalueofthebond.
III.Eachinterestpaymentperbondwillbe$40.
IV.Theyieldtomaturitywhenthebondsarefirstissuedis8percent.
a.IandIIonly
b.IIandIIIonly
c.II,III,andIVonly
d.I,II,andIIIonly
e.I,III,andIVonly
SEMIANNUALBONDSANDEFFECTIVEANNUALRATE
d42.ThenewlyissuedbondsoftheWynslowCorp.offera6percentcouponwithsemiannualinterestpayments.Thebondsarecurrentlypricedatparvalue.Theeffectiveannualrateprovidedbythesebondsmustbe:
a.equalto3percent.
b.greaterthan3percentbutlessthan4percent.
c.equalto6percent.
d.greaterthan6percentbutlessthan7percent.
e.equalto12percent.
INTERESTRATERISK
d43.Whichoneofthefollowingstatementsiscorrectconcerninginterestrateriskasitrelatestobonds,allelseequal?
a.Theshorterthetimetomaturity,thegreatertheinterestraterisk.
b.Thehigherthecouponrate,thegreatertheinterestraterisk.
c.Forabondsellingatparvalue,thereisnointerestraterisk.
d.Thegreaterthenumberofsemiannualinterestpayments,thegreatertheinterestraterisk.
e.Thelowertheamountofeachinterestpayment,thelowertheinterestraterisk.
INTERESTRATERISK
e44.Whichoneofthefollowingbondshasthegreatestinterestraterisk?
a.5-year;9percentcoupon
b.5-year;7percentcoupon
c.7-year;7percentcoupon
d.9-year;9percentcoupon
e.9-year;7percentcoupon
INTERESTRATERISK
b45.Interestraterisk_____asthetimetomaturityincreases.
a.increasesatanincreasingrate
b.increasesatadecreasingrate
c.increasesataconstantrate
d.decreasesatanincreasingrate
e.decreasesatadecreasingrate
INTERESTRATERISK
c46.Youownabondthathasa7percentcouponandmaturesin12years.Youpurchased
thisbondatparvaluewhenitwasoriginallyissued.Ifthecurrentmarketrateforthis
typeandqualityofbondis7.5percent,thenyouwouldexpect:
a.thebondissuertoincreasetheamountofeachinterestpaymentonthesebonds.
b.theyieldtomaturitytoremainconstantduetothefixedcouponrate.
c.torealizeacapitallossifyousoldthebondatthemarketpricetoday.
d.today’smarketpricetoexceedthefacevalueofthebond.
e.thecurrentyieldtodaytobelessthan7percent.
INTERESTRATERISK
c47.Youexpectinterestratestodeclineandwishtocapitalizeontheanticipatedchangesin
bondprices.Torealizeyourmaximumgain,allelseconstant,youshouldpurchase
_____bonds.
a.short-term;lowcoupon
b.short-term;highcoupon
c.long-term;zerocoupon
d.long-term;lowcoupon
e.long-term;highcoupon
YIELDTOMATURITYANDCURRENTYIELD
e48.Allelseconstant,asthemarketpriceofabondincreasesthecurrentyield_____and
theyieldtomaturity_____
a.increases;increases.
b.increases;decreases.
c.remainsconstant;increases.
d.decreases;increases.
e.decreases;decreases.
BONDFEATURES
d49.Whichofthefollowingstatementsconcerningbondfeaturesis（are）correct?
I.Bondholdersgenerallyhavevotingpowerinacorporation.
II.Bondinterestistax-deductibleasabusinessexpense.
III.Therepaymentofthebondprincipleistax-deductible.
IV.Failuretopayeithertheinterestpaymentsorthebondprincipleasagreedcancausea
firmtogointobankruptcy.
a.IIonly
b.IandIIonly
c.IIIandIVonly
d.IIandIVonly
e.II,III,andIVonly
BONDINDENTURE
d50.Whichofthefollowingitemsaregenerallyincludedinabondindenture?
I.callprovisions
II.securitydescription
III.currentyield
IV.protectivecovenants
a.IandIIonly
b.IIandIVonly
c.II,III,andIVonly
d.I,II,andIVonly
e.I,II,III,andIV
BONDCLASSIFICATIONS
e51.Whichoneofthefollowingstatementsiscorrectconcerningbondclassifications?
a.Adebentureisalong-termbondsecuredbythefixedassetsofafirm.
b.Amortgagesecurityisabondissuedsolelybyahomebuilder.
c.Anoteisabondwhichhasanoriginalmaturitydatelongerthan10years.
d.Asubordinatedbondreceivespreferentialtreatmentoverallotherbondsina
bankruptcy.
e.Acallablebondcanberepurchasedbytheissuerpriortotheinitialmaturitydate.
CALLABLEBONDS
b52.Callablebondsgenerally:
a.allowthebondholdertodecidewhenthebondistobecalled.
b.areassociatedwithsinkingfunds.
c.permittheissuertorepurchasethebondsatadiscount.
d.arecalledwithinthefirstcoupleofyearsafterissuance.
e.arerequiredtohaveadeferredcallprovisioniftheyhavea“make-whole”call
provision.
PROTECTIVECOVENANTS
c53.Whichofthefollowingisa（are）positivecovenant（s）thatmightbefoundinabond
indenture?
I.Thecompanyshallmaintainacurrentratioof1.5orbetter.
II.Thecompanymustlimittheamountofdividendsitpaysaccordingtothestatedformula.
III.Thecompanycannotleaseanymajorassetswithoutapprovalbythelender.
IV.Thecompanymustmaintaintheloancollateralingoodworkingorder.
a.Ionly
b.IandIIonly
c.IandIVonly
d.IIandIVonly
e.I,II,andIVonly
PROTECTIVECOVENANTS
e54.Protectivecovenants:
a.areprimarilydesignedtoprotecttheissuingcorporationfromunreasonabledemands
ofbondholders.
b.areconsistentforallbondsissuedbyacorporationwithintheUnitedStates.
c.arelimitedtostatingactionswhichafirmmusttake.
d.onlyapplytobondsthathaveadeferredcallprovision.
e.areprimarilydesignedtoprotectbondholdersfromfutureactionsofthebondissuer.
BONDRATINGS
b55.Whichoneofthefollowingstatementsconcerningbondratingsiscorrect?
a.StandardandPoor’sandValueLinearetheprimarybondratingagencies.
b.Bondratingsaresolelyanassessmentofthecreditworthinessofthebondissuer.
c.Investmentgradebondsincludeonlythosebondsreceivingoneofthehighestthree
bondratings.
d.Bondratingsevaluatetheexpectedpricevolatilityofabondissue.
e.Allbondsreceivethesameratingclassificationfromallratingagencies.
BONDRATINGS
d56.A“fallenangel”isabondthat:
a.lowereditsannualinterestpayment.
b.hasmovedfrombeingalong-termobligationtobeingashort-termobligation.
c.hasmovedfromhavingayieldtomaturityinexcessofthecouponratetohavinga
yieldtomaturitythatislessthanthecouponrate.
d.hasmovedfrombeinganinvestment-gradebondtobeingajunkbond.
e.isratedasBabyoneratingagencyandratedasBBbyanotherratingagency.
TREASURYBONDS
a57.BondsissuedbytheU.S.government:
I.areconsideredtobefreeofdefaultrisk.
II.areconsideredtobefreeofinterestraterisk.
III.providetotallytax-freeincome.
IV.payinterestthatisexemptfromfederalincometaxes.
a.Ionly
b.IandIIIonly
c.IandIVonly
d.IIandIIIonly
e.IIandIVonly
TREASURYBONDS
d58.Treasurybondsare:
a.thosebondsissuedbyanygovernmentalagencyintheU.S.
b.issuedonlyonthefirstdayofeachfiscalyearbytheU.S.DepartmentofTreasury.
c.preferredbyhigh-incomeindividualsbecausetheyofferthebesttaxbenefits.
d.generallyissuedascouponbonds.
e.totallyrisk-free.
MUNICIPALBONDS
a59.Municipalbonds:
a.offerincometaxadvantagestoindividuals.
b.generallypayahigherrateofreturnthancorporatebonds.
c.arethosebondsissuedonlybylocalmunicipalities,suchasacityoraborough.
d.arerarelycallable.
e.payinterestthatisalwaysexemptfrombothfederalandst
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