投资学第7版TestBank答案080336.docx

1、投资学第7版TestBank答案080336perce nt.perce nt.perce nt.Multiple Choice Questions:L The current yield on a bond is equal to A)annual interest divided by the current market priceB)the yield to maturityC)annual interest divided by the par valueD)the internal rate of returnE)none of the aboveaAnswer: A Diffic

2、ulty: EasyRationale: A is current yield and is quoted as such in the financial press.2.If a 7% coupon bond is trading for $, it has a current yield of A)B)C)D)E)Answer: E Difficulty: EasyRationale: 70/975 =3.If a 6% coupon bond is trading for $, it has a current yield of A)B)C)D)E)AAnswer: B Difficu

3、lty: EasyRationale: 60/950 =4.If an 8% coup on bond is tradi ng for $, it has a current yield of _A)B)C)D)E)Answer: A Difficulty: EasyRationale: 80/1025 =5.If a % coupon bond is trading for $, it has a current yield of percent.A)B)C)D)E)B)%C)%D)%E)none of the above%Answer: A Difficulty: ModerateRati

4、onale: FV = 1000, n = 4, PMT = 100, i = 12, PV= ; $100/$ = %7.A coup on bond pays annual interest, has a par value of $1,000, matures 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)%B)%C)%D)%E)none of the aboveAnswer: D Difficulty: Moder

5、ateRationale: FV = 1000, n = 12, PMT = 110, i = 12, PV= ; $100/$ = %8.Of the following four investments, is considered the safestA)commercial paperB)corporate bondsC)U S Agency issuesD)Treasury bondsE)Treasury billsAnswer: E Difficulty: EasyRati on ale: Only Treasury issues are insured by the U S go

6、vernment; the shorter-term the instrument, the safer the instrument.9.To earn a high rati ng from the bond rating agencies, a firm should haveA)a low times interest earned ratioB)a low debt to equity ratioC)a high quick ratioD)B and CE)A and CJAnswer: D Difficulty: EasyRati on ale: High values for t

7、he times interest and quick ratios and a low debt to equity ratio are desirable indicators of safety.10.At issue, coupon bonds typically sell A)above par value)B)below parC)at or near par valueD)at a value unrelated to parE)none of the aboveAnswer: C Difficulty: EasyRati on ale: If the inv estme nt

8、banker has appraised the market and the 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 interestA)is quoted in the bond price in the financial pressB)must be paid by the buy

9、er of the bond and remitted to the seller of the bond.C)must be paid to the broker for the inconvenience of selling bonds between maturity datesD)A and BE)A and CAnswer: B Difficulty: ModerateRati on ale: Accrued in terest must be paid by the buyer, but is not included in the quotations page price12

10、.The invoice price of a bond that a buyer would pay is equal toA)the asked price plus accrued interestjB)the asked price less accrued interestC)the bid price plus accrued interestD)the bid price less accrued interestE)the bid priceAnswer: A Difficulty: EasyRati on ale: The buyer of a bond will buy a

11、t the 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 istraded for settlement on August 15. The accrued interest on the $100,000 face value of this note is A)$YB)$C)$D)$1,E)none of the abo

12、veAnswer: D Difficulty: ModerateRationale: 76/183($4,000) = $1,. Approximation: .08/12*100,000= per month, month * mon ths = 14. A coup on bond is reported as havi ng an ask price of 113% ofthe $1,000 par value in the Wall Street Journal. If the last interest payment was made two mon ths ago and the

13、 coup on rate is 12%, the inv oice price of the bond will be A)$1,100B)$1,110C)$1,150D)$1,160E)none of the aboveAnswer: C Difficulty: ModerateRationale: $1,130 + $20 (accrued interest) = $1,150.15.The bonds of Ford Motor Compa ny have received a rati ng of D11 by Moodys Then ABCrating indicatesthe b

14、onds are insuredthe bonds are junk bondsthe bonds are referred to as high yield11 bondsD)A and BE)BandCAnswer: E Difficulty: EasyRati on ale: D ratings are risky bon ds, often called junk bonds (or high yield bonds by those marketi ng such bon ds).16.The bond marketA)can be quite thin.B)primarily co

15、nsists of a network of bond dealers in the over the counter market.C)consists of many investors on any given dayAD)A and B.E)B and C.Answer: D Difficulty: EasyRationale: The bond market, unlike the stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers17.Cete

16、ris paribus, the price and yield on a bond areA)positively relatedB)negatively relatedC)sometimes positively and sometimes negatively relatedE) not relatedE) indefinitely relatedAnswer: B Difficulty: EasyRati on ale: Bond prices and yields are inversely related J18.The is a measure of the average ra

17、te of return an investor will earn 讦 theinvestor buys the bond now and holds until maturityA)current yieldB)dividend yieldC)P/E ratioD)yield to maturityE)discount yieldAnswer: D D讦ficulty: EasyRationale: The current yield is the annual interest as a percent of current market price; the other choices

18、 do not apply to bonds.)19.The gives the number of shares for which each convertible bond can beexchangedA)conversion ratioB)current ratioC)P/E ratioD)conversion premiumE)convertible floorAnswer: A Difficulty: EasyRationale: The conversion premium is the amount for which the bond sells above convers

19、ion value; the price of bond as a straight bond provides the floor. The other terms are not spec 讦 ically releva nt to conv ertible bonds 20.A coup on bond is a bond that A)pays in terest on a regular basis (typically every six mon ths)B)does not pay interest on a regular basis but pays a lump sum a

20、t maturityC)can always be converted into a specific number of shares of common stock in the issuing companyAD)always sells at parE)none of the aboveAnswer: A Difficulty: EasyRati on ale: A coupon bond will pay the coup on rate of interest on a semiannual basis un less the firm defaults on the bond C

21、onvertible bonds are spec讦ic types of bondsD)% and %E)none of the aboveAnswer: A Difficulty: ModerateRationale: Mobil: %-% = %; Lucent Technologies: % - % = %it25.A Treasury bond due in one year has a yield of %; a Treasury bond due in 5 years has a yield of % A bond issued by Xerox due in 5 years h

22、as a yield of %; a bond issued by Exxon due in one year has a yield of % The default risk premiums on the bonds issued by Exxon and Xerox, respectively, areA)% and %B)% and .7%C)% and %D)% and %E)none of the aboveAnswer: A Difficulty: ModerateRationale: Exxon: %-% = %; Xerox: 7. 9% - % = %26.Floatin

23、g-rate bonds are designed to while convertible bonds aredesigned to .A)minimize the holders1 interest rate risk; give the investor the ability to share in the price appreciation of the companyfs stockB)maximize the holders interest rate risk; give the investor the ability to share in the price appre

24、ciation of the companys stockC)minimize the holders1 interest rate risk; give the investor the ability to benefit from interest rate changesD)maximize the holders interest rate risk; give investor the ability to share in the profits of the issuing companyE)none of the aboveAnswer: A Difficulty: Mode

25、rateRati on ale: Floati ng rate bonds allow the investor to earn a rate of interest income tied to current interest rates, thus negating one of the major disadvantages of fixed income investments. Convertible bonds allow the investor to benefit from the appreciation of the stock price, either by converting to stock or holding the bond, which will increase in price