投资学第7版Test Bank答案.docx

1、投资学第7版Test Bank答案Multiple Choice Questions 1. The current yield on a bond is equal to _. A) annual interest divided by the current market price B) the yield to maturity C) annual interest divided by the par value D) the internal rate of return E) none of the above Answer: A Difficulty: Easy Rational

2、e: A is current yield and is quoted as such in the financial press. 2. If a 7% coupon bond is trading for $975.00, it has a current yield of _ percent. A) 7.00 B) 6.53 C) 7.24 D) 8.53 E) 7.18 Answer: E Difficulty: Easy Rationale: 70/975 = 7.18. 3. If a 6% coupon bond is trading for $950.00, it has a

3、 current yield of _ percent. A) 6.5 B) 6.3 C) 6.1 D) 6.0 E) 6.6 Answer: B Difficulty: Easy Rationale: 60/950 = 6.3. 4. If an 8% coupon bond is trading for $1025.00, it has a current yield of _ percent. A) 7.8 B) 8.7 C) 7.6 D) 7.9 E) 8.1 Answer: A Difficulty: Easy Rationale: 80/1025 = 7.8. 5. If a 7.

4、5% coupon bond is trading for $1050.00, it has a current yield of _ percent. A) 7.0 B) 7.4 C) 7.1 D) 6.9 E) 6.7 Answer: C Difficulty: Easy Rationale: 75/1050 = 7.1. 6. A coupon bond pays annual interest, has a par value of $1,000, matures in 4 years, has a coupon rate of 10%, and has a yield to matu

5、rity of 12%. The current yield on this bond is _. A) 10.65% B) 10.45% C) 10.95% D) 10.52% E) none of the above Answer: A Difficulty: Moderate Rationale: FV = 1000, n = 4, PMT = 100, i = 12, PV= 939.25; $100 / $939.25 = 10.65%. 7. A coupon bond pays annual interest, has a par value of $1,000, matures

6、 in 12 years, has a coupon rate of 11%, and has a yield to maturity of 12%. The current yield on this bond is _. A) 10.39% B) 10.43% C) 10.58% D) 10.66% E) none of the above Answer: D Difficulty: Moderate Rationale: FV = 1000, n = 12, PMT = 110, i = 12, PV= 938.06; $100 / $938.06 = 10.66%. 8. Of the

7、 following four investments, _ is considered the safest. A) commercial paper B) corporate bonds C) U. S. Agency issues D) Treasury bonds E) Treasury bills Answer: E Difficulty: Easy Rationale: Only Treasury issues are insured by the U. S. government; the shorter-term the instrument, the safer the in

8、strument. 9. To earn a high rating from the bond rating agencies, a firm should have A) a low times interest earned ratio B) a low debt to equity ratio C) a high quick ratio D) B and C E) A and C Answer: D Difficulty: Easy Rationale: High values for the times interest and quick ratios and a low debt

9、 to equity ratio are desirable indicators of safety. 10. At issue, coupon bonds typically sell _. A) above par value B) below par C) at or near par value D) at a value unrelated to par E) none of the above Answer: C Difficulty: Easy Rationale: If the investment banker has appraised the market and th

10、e quality of the bond correctly, the bond will sell at or near par (unless interest rates have changed very dramatically and very quickly around the time of issuance). 11. Accrued interest A) is quoted in the bond price in the financial press. B) must be paid by the buyer of the bond and remitted to

11、 the seller of the bond. C) must be paid to the broker for the inconvenience of selling bonds between maturity dates. D) A and B. E) A and C. Answer: B Difficulty: Moderate Rationale: Accrued interest must be paid by the buyer, but is not included in the quotations page price. 12. The invoice price

12、of a bond that a buyer would pay is equal to A) the asked price plus accrued interest. B) the asked price less accrued interest. C) the bid price plus accrued interest. D) the bid price less accrued interest. E) the bid price. Answer: A Difficulty: Easy Rationale: The buyer of a bond will buy at the

13、 asked price and will also be invoiced for any accrued interest due to the seller. 13. An 8% coupon U. S. Treasury note pays interest on May 30 and November 30 and is traded for settlement on August 15. The accrued interest on the $100,000 face value of this note is _. A) $491.80 B) $800.00 C) $983.

14、61 D) $1,661.20 E) none of the above Answer: D Difficulty: Moderate Rationale: 76/183($4,000) = $1,661.20. Approximation: .08/12*100,000=666.67 per month. 666.67/month * 2.5 months = 1.666.67. 14. A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the Wall Street Jou

15、rnal. If the last interest payment was made two months ago and the coupon rate is 12%, the invoice price of the bond will be _. A) $1,100 B) $1,110 C) $1,150 D) $1,160 E) none of the above Answer: C Difficulty: Moderate Rationale: $1,130 + $20 (accrued interest) = $1,150. 15. The bonds of Ford Motor

16、 Company have received a rating of D by Moodys. The D rating indicates A) the bonds are insured B) the bonds are junk bonds C) the bonds are referred to as high yield bonds D) A and B E) B and C Answer: E Difficulty: Easy Rationale: D ratings are risky bonds, often called junk bonds (or high yield b

17、onds by those marketing such bonds). 16. The bond market A) can be quite thin. B) primarily consists of a network of bond dealers in the over the counter market. C) consists of many investors on any given day. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: The bond market, unlike the

18、stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers. 17. Ceteris paribus, the price and yield on a bond are A) positively related. B) negatively related. C) sometimes positively and sometimes negatively related. E) not related. E) indefinitely related. Ans

19、wer: B Difficulty: Easy Rationale: Bond prices and yields are inversely related. 18. The _ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity. A) current yield B) dividend yield C) P/E ratio D) yield to maturity E) discount yie

20、ld Answer: D Difficulty: Easy Rationale: The current yield is the annual interest as a percent of current market price; the other choices do not apply to bonds. 19. The _ gives the number of shares for which each convertible bond can be exchanged. A) conversion ratio B) current ratio C) P/E ratio D)

21、 conversion premium E) convertible floor Answer: A Difficulty: Easy Rationale: The conversion premium is the amount for which the bond sells above conversion value; the price of bond as a straight bond provides the floor. The other terms are not specifically relevant to convertible bonds. 20. A coup

22、on bond is a bond that _. A) pays interest on a regular basis (typically every six months) B) does not pay interest on a regular basis but pays a lump sum at maturity C) can always be converted into a specific number of shares of common stock in the issuing company D) always sells at par E) none of

23、the above Answer: A Difficulty: Easy Rationale: A coupon bond will pay the coupon rate of interest on a semiannual basis unless the firm defaults on the bond. Convertible bonds are specific types of bonds. 21. A _ bond is a bond where the bondholder has the right to cash in the bond before maturity

24、at a specified price after a specific date. A) callable B) coupon C) put D) Treasury E) zero-coupon Answer: C Difficulty: Easy Rationale: Any bond may be redeemed prior to maturity, but all bonds other than put bonds are redeemed at a price determined by the prevailing interest rates. 22. Callable b

25、onds A) are called when interest rates decline appreciably. B) have a call price that declines as time passes. C) are called when interest rates increase appreciably. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: Callable bonds often are refunded (called) when interest rates decline

26、appreciably. The call price of the bond (approximately par and one years coupon payment) declines to par as time passes and maturity is reached. 23. A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%. A bond issued by Ford Motor Company due in 5 y

27、ears has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%. The default risk premiums on the bonds issued by Shell and Ford, respectively, are A) 1.0% and 1.2% B) 0.7% and 1.5% C) 1.2% and 1.0% D) 0.8% and 1.3% E) none of the above Answer: D Difficulty: Moderate Rationa

28、le: Shell: 6.5% - 5.7% = .8%; Ford: 7.5% - 6.2% = 1.3%. 24. A Treasury bond due in one year has a yield of 4.6%; a Treasury bond due in 5 years has a yield of 5.6%. A bond issued by Lucent Technologies due in 5 years has a yield of 8.9%; a bond issued by Mobil due in one year has a yield of 6.2%. Th

29、e default risk premiums on the bonds issued by Mobil and Lucent Technologies, respectively, are: A) 1.6% and 3.3% B) 0.5% and .7% C) 3.3% and 1.6% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: Moderate Rationale: Mobil: 6.2% - 4.6% = 1.6%; Lucent Technologies: 8.9% - 5.6% = 3.3%. 25. A

30、 Treasury bond due in one year has a yield of 6.2%; a Treasury bond due in 5 years has a yield of 6.7%. A bond issued by Xerox due in 5 years has a yield of 7.9%; a bond issued by Exxon due in one year has a yield of 7.2%. The default risk premiums on the bonds issued by Exxon and Xerox, respectivel

31、y, are A) 1.0% and 1.2% B) 0.5% and .7% C) 1.2% and 1.0% D) 0.7% and 0.5% E) none of the above Answer: A Difficulty: Moderate Rationale: Exxon: 7.2% - 6.2% = 1.0%; Xerox: 7. 9% - 6.7% = 1.2%. 26. Floating-rate bonds are designed to _ while convertible bonds are designed to _. A) minimize the holders intere