兹维博迪金融学第二版试题库08TB(22页).doc

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1、-Chapter EightValuation of Known Cash Flows: BondsThis chapter contains 50 multiple choice questions, 18 short problems and 9 longer problems.Multiple Choice1. A _ is a quantitative method used to infer an assets value from market information about the prices of other assets and market interest rate

2、s.(a) fixed model(b) perpetual valuation model(c) valuation model(d) variable modelAnswer: (c)2. _ are examples of fixed-income securities.(a) Common stock and pension funds(b) Mortgages and pension annuities(c) Mutual funds and common stock(d) Preferred stock and common stockAnswer: (b)3. Consider

3、a fixed-income security that promises to pay $150 each year for the next five years. How much is this five-year annuity worth if the appropriate discount rate is 7% per year?(a) $534.74(b) $615.03(c) $802.50(d) $867.96Answer: (b)4. Consider a fixed-income security that promises to pay $120 each year

4、 for the next four years. Calculate the value of this four-year annuity if the appropriate discount rate is 6% per year.(a) $415.81(b) $508.80(c) $531.85(d) $629.06Answer: (a)5. The price of any existing fixed-income security _ when market interest rates rise because investors will only be willing t

5、o _ them if they offer a competitive yield.(a) rises; buy(b) rises; sell(c) falls; buy(d) falls; sellAnswer: (c)6. A fall in interest rates causes a _ in the market value of a fixed-income security.(a) a rise(b) a fall(c) no change(d) it cannot be determined from the information givenAnswer: (a)7. A

6、 change in market interest rates causes _ in the market values of all existing contracts promising fixed payments in the future.(a) a change in the same direction(b) a change in the opposite direction(c) no change(d) an unpredictable variationAnswer: (b)8. What happens to the value of a four-year fi

7、xed-income security promising $100 per year if the market interest rate rises from 5% to 6% per year?(a) A rise of 1% causes a drop of $4.87 in market value.(b) A rise of 1% causes a rise of $4.87 in market value.(c) A rise of 1% causes a drop of $8.09 in market value.(d) A rise of 1% causes a rise

8、of $8.09 in market value.Answer: (c)9. What happens to the value of a four-year fixed-income security promising $100 per year if the market interest rate falls from 6% to 5% per year?(a) A fall of 1% causes a drop of $4.87 in market value.(b) A fall of 1% causes a rise of $4.87 in market value.(c) A

9、 fall of 1% causes a drop of $8.09 in market value.(d) A fall of 1% causes a rise of $8.09 in market value.Answer: (d)10. A zero-coupon bond is also known as _.(a) a perpetual bond(b) a pure discount bond(c) a market rebate(d) an infinite bondAnswer: (b)11. The promised cash payment on a pure discou

10、nt bond is called its _.(a) face value(b) par value(c) fixed interest(d) both a and bAnswer: (d)12. What is the yield of a 1-year pure discount bond with a price of $850 and a face value of $1,000?(a) 8.50%(b) 9.09%(c) 15.00%(d) 17.65%Answer: (d)13. What is the yield of a 1-year pure discount bond w

11、ith a price of $900 and a face value of $1,000? (a) 5.26%(b) 10.00%(c) 11.11%(d) 15.79%Answer: (c)14. Consider a four-year pure discount bond with a face value of $1,000. If its current price is $850, compute its annualized yield.(a) 1.17%(b) 4.15%(c) 5.57%(d) 17.60%Answer: (b)15. Consider a three-y

12、ear pure discount bond with a face value of $1,000. If its current price is $900, compute its annualized yield.(a) 1.036%(b) 1.111%(c) 3.57%(d) 5.41%Answer: (c)16. Consider a five-year pure discount bond with a face value of $1,000. If its current price is $780, what is its annualized yield?(a) 5.09

13、%(b) 2.82%(c) 1.28%(d) 1.05%Answer: (a)17. A _ obligates the issuer to make periodic payments of interest to the bondholder for the life of the bond and then to pay the face value of the bond when the bond matures.(a) pure discount(b) zero-coupon(c) perpetual bond(d) coupon bondAnswer: (d)18. The _

14、of the bond is interest rate applied to the _ of the bond to compute the periodic payment.(a) coupon rate; face value(b) maturity rate; face value(c) coupon rate; price(d) maturity rate; priceAnswer: (a)19. For a bond with a face value of $1,000 and coupon rate of 11%, what is the annual coupon paym

15、ent?(a) $100(b) $110(c) $1,000(d) $1,100Answer: (b)20. For a bond with a face value of $1,000 and a coupon rate of 9%, what is the annual coupon payment?(a) $90(b) $99(c) $1,000(d) $1,190Answer: (a)21. If the market price of a coupon bond equals its face value, it is also termed a _.(a) par bond(b)

16、premium bond(c) discount bond(d) zero-discount bondAnswer: (a)22. If the bonds market price is higher than its face value, it is termed a _.(a) par bond(b) premium bond(c) discount bond(d) zero-discount bondAnswer: (b)23. If the bonds market price is lower than its face value, it is termed a _.(a) p

17、ar bond(b) premium bond(c) discount bond(d) zero-par bondAnswer: (c)24. If a bond selling for $850 has an annual coupon payment of $80 and a face value of $1,000, what is its current yield?(a) 8.00%(b) 9.41%(c) 17.65%(d) 27.05%Answer: (b)25. If a bond selling for $1,120 has an annual coupon payment

18、of $110 and a face value of $1,000, what is its current yield?(a) 8.90%(b) 9.82%(c) 10.71%(d) 11.00%Answer: (b)26. If a bond selling for $900 has an annual coupon payment of $80 and a face value of $1,000, what is its current yield?(a) 8.00%(b) 8.89%(c) 11.00%(d) 20.00%Answer: (b)27. The _ is the di

19、scount rate that makes the present value of the bonds stream of promised cash payments equal to its price.(a) compound rate(b) yield to maturity(c) coupon rate(d) current yieldAnswer: (b)28. Suppose you are considering buying a one-year 11% coupon bond with a face value of $1,000 and a current price

20、 of $1,020. What is its yield to maturity?(a) 8.82%(b) 9.00%(c) 10.78%(d) 11.00%Answer: (a)29. Suppose you are considering buying a one-year 11% coupon bond with a face value of $1,000 and a current price of $1,050. What is its yield to maturity?(a) 4.76%(b) 5.71%(c) 6.00%(d) 10.48%Answer: (b)30. Su

21、ppose you are considering buying a five-year 11% coupon bond with a face value of $1,000 and a current price of $950. What is its yield to maturity?(a) 5.62%(b) 9.63%(c) 11.58%(d) 12.40%Answer: (d)31. Suppose you are considering buying a five-year 11% coupon bond with a face value of $1,000 and a cu

22、rrent price of $1,100. What is its yield to maturity?(a) 3.87%(b) 8.47%(c) 10.00%(d) 13.62%Answer: (b)32. Suppose you are considering buying a six-year 10% coupon bond with a face value of $1,000 and a current price of $1,100. What are the current yield and yield to maturity of this bond?(a) CY = 11

23、.00%; YTM = 12.23%(b) CY = 12.23%; YTM = 11.00%(c) CY = 7.85%; YTM = 9.09%(d) CY = 9.09%; YTM = 7.85%Answer (d)33. Suppose you are considering buying a seven-year 11% coupon bond with a face value of $1,000 and a current price of $950. What are the current yield and yield to maturity of this coupon

24、bond?(a) CY = 12.10%; YTM = 11.58%(b) CY = 11.58%; YTM = 12.10%(c) CY = 9.92%; YTM = 10.45%(d) CY = 10.45%; YTM = 9.92%Answer: (b)34. Over time bond prices _ their face value. Before maturity, bond prices can _ a great deal as a result of changes in market interest rates.(a) diverge from; fluctuate(

25、b) converge toward; flatten out(c) converge toward; fluctuate(d) diverge from; flatten outAnswer: (c)35. When the yield curve is not flat, bonds of the same _ with different coupon rates have _ yields to maturity.(a) maturity, different(b) maturity, identical(c) callability, different(d) callability

26、, identicalAnswer: (a)36. Bonds offering the same future stream of promised payments can differ in a number of ways, but the two most important are _ and _.(a) taxability, issue origin(b) type of issuer, default risk(c) type of issuer, taxability(d) taxability, default risk Answer: (d)37. A _ is one

27、 that gives the holder of a bond issued by a corporation the right to convert the bond into a pre-specified number of shares of common stock.(a) callable bond(b) convertible bond(c) stock bond(d) preferred bondAnswer: (b)38. A _ is one that gives the issuer of the bond the right to redeem it before

28、the final maturity date.(a) callable bond(b) convertible bond(c) stock bond(d) preferred bondAnswer: (a)39. Five years ago, English and Co. issued 25-year coupon bonds with par value $1,000. At the time of issuance, the yield to maturity was 6 percent and the bonds sold at par. The bonds are current

29、ly selling at 110 percent of their par value. Assuming that the coupon is paid annually, what is the current yield to maturity?(a) 3.77%(b) 5.18%(c) 5.27%(d) 5.46%Answer: (b)40. Potemkin Corporation plans to raise $10,000,000 in funds by issuing zero coupon $1,000 par value bonds with a 25 year matu

30、rity. Potemkin Corporation is able to issue these bonds at an after tax cost of debt of 12%. To the nearest whole number, how many bonds must Potemkin Corporation issue? (a) 10,000 bonds(b) 42,919 bonds(c) 125,837 bonds(d) 170,000 bondsAnswer: (d)41. Calculate the years to maturity for a bond based

31、on the following information. The bond trades at $950, it has a par value of $1,000, a coupon rate of 11%, and a required rate of return of 12%.(a) 8 years(b) 12 years(c) 15 years(d) 16 yearsAnswer: (a)42. Compute the current price of Walsingham bonds based on the following information. Walsingham b

32、onds have a $1,000 par value, have 20 years remaining until maturity, a 12 percent coupon rate, and a yield to maturity of 10.5 percent.(a) $858.42(b) $982.47(c) $1,119.52(d) $1,124.41Answer: (d)43. Compute the yield to maturity of Arundel bonds based on the following information. Arundel bonds have

33、 a $1,000 par value, 25 years remaining until maturity, an 11% coupon rate, and a current market price of $1,187.(a) 4.55% (b) 9.08%(c) 9.27%(d) 13.17%Answer: (b)44. When prices of U.S Treasury strips are listed, principal from a Treasury bond is denoted by the letters _.(a) ci(b) tb(c) bp(d) npAnsw

34、er: (c)45. The _ is the price at which dealers in Treasury bonds are willing to sell.(a) bid price(b) asked yield(c) ask price(d) maturity priceAnswer: (c)46. The _ is the price at which dealers are willing to buy.(a) bid price(b) ask price(c) asked yield(d) maturity priceAnswer: (a)47. The bid pric

35、e of a bond is always _ the ask price.(a) greater than(b) less than(c) identical to(d) it varies from case to caseAnswer: (b)48. The _ of a bond price measures the sensitivity of the bond price to a change in the yield to maturity.(a) callability(b) convertibility(c) immutability(d) elasticityAnswer

36、: (d)49. Suppose you buy a 25-year pure discount bond with a face value of $1,000 and a yield of 6% per year. A day later market interest rates drop to 5% and so does the yield on your bond. What is the proportional change in the price of your bond?(a) a decrease of 26.74%(b) a decrease of 21.10%(c)

37、 an increase of 26.74(d) an increase of 21.20Answer: (c)50. Suppose you buy a 25-year pure discount bond with a face value of $1,000 and a yield of 6% per year. A day later market interest rates rise to 5% and so does the yield on your bond. What is the elasticity of the bond price to the change in

38、the yield?(a) 0.62%(b) 1.27%(c) 1.60%(d) 2.67%Answer: (c)Short Problems1. Consider a five-year fixed-income security which promises $120 per year. Calculate the value of the security if the market interest rate rises from 5% to 6% per year.Answer:niPVPMTResult55?$120PV = $519.54niPVPMTResult56?$120P

39、V = $505.48The price drops by $14.06.2. Consider a four-year fixed-income security which promises $120 per year. Calculate the value of the security if the market interest rate falls from 7% to 6% per year.Answer:niPVPMTResult47?$120PV = $406.47niPVPMTResult46?$120PV = $415.81The price increases by

40、$9.34.3. Discuss the general principles about the relation between prices and yields of coupon bonds.Answer:Principle #1: Par Bonds.If a bonds price equals its face value, then its yield equals its coupon rate.Principle #2: Premium Bonds.If a coupon bond has a price higher than its face value, its y

41、ield to maturity is less than its current yield, which is in turn less than its coupon rate.Principle #3: Discount Bonds.If a coupon bond has a price lower than its face value, its yield to maturity is greater than its current yield, which is in turn greater than its coupon rate.4. List some reasons

42、 why differences in the prices of fixed-income securities of a given maturity may arise.Answer:Differences in the prices of fixed-income securities of a given maturity may arise due to differences in coupon rates, default risk, tax treatment, callability and convertibility.5. Explain why it is impor

43、tant to have a method for valuation of fixed-income contracts.Answer:(1) The parties to the contracts need to have an agreed-upon valuation procedure in setting the terms of the contracts at the outset.(2) Since market factors determining the value of fixed-income contracts change over time, both bu

44、yers and sellers have to reevaluate them each time they are traded.6. Consider a five-year pure discount bond with a face value of $1,000. If its current price is $775, compute its annualized yield.Answer:niPVFVResult5?$775$1,000i = 5.23%7. A four-year bond has a coupon rate of 6% per year, a price of $950, and a face value of $1,000. Calculate its current yield and yield to maturity.Answer:Current yield = coupon/price= 60/950= 6.32%To calculate yield to maturity:ni = YTMPVFVP