A 12-year bond has a 9 percent annual coupon, a yield to maturity of 8 percent, and a face value of $1,000. What is the price of the bond?

A 12-year bond has a 9 percent annual coupon, a yield to maturity of 8 percent, and a face value of $1,000.  What is the price of the bond?

a. $1,469
b. $1,000
c. $  928
d. $1,075
e. $1,957









Answer: D

An annual coupon bond with a $1,000 face value matures in 10 years. The bond currently sells for $903.7351 and has a 9 percent yield to maturity. What is the bond’s annual coupon rate?

An annual coupon bond with a $1,000 face value matures in 10 years.  The bond currently sells for $903.7351 and has a 9 percent yield to maturity. What is the bond’s annual coupon rate?

a. 6.7%
b. 7.0%
c. 7.2%
d. 7.5%
e. 7.7%









Answer: D

Which of the following statements is most correct?

Which of the following statements is most correct?

a. If a bond is selling at par value, its current yield equals its yield to maturity.
b. If a bond is selling at a discount to par, its current yield will be less than its yield to maturity.
c. All else equal, bonds with longer maturities have more interest rate (price) risk than do bonds with shorter maturities.
d. All of the statements above are correct.
e. None of the statements above is correct.








Answer: D

A 10-year corporate bond has an annual coupon payment of 9 percent. The bond is currently selling at par ($1,000). Which of the following statements is most correct?

A 10-year corporate bond has an annual coupon payment of 9 percent.  The bond is currently selling at par ($1,000).  Which of the following statements is most correct?

a. The bond’s yield to maturity is 9 percent.
b. The bond’s current yield is 9 percent.
c. If the bond’s yield to maturity remains constant, the bond’s price will remain at par.
d. Statements a and c are correct.
e. All of the statements above are correct.










Answer: E

Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease by 1 percent?

Which of the following bonds will have the greatest percentage increase in value if all interest rates decrease by 1 percent?

a. 20-year, zero coupon bond.
b. 10-year, zero coupon bond.
c. 20-year, 10 percent coupon bond.
d. 20-year, 5 percent coupon bond.
e. 1-year, 10 percent coupon bond.







Answer: A

Which of the following statements is most correct?

Which of the following statements is most correct?

a. Relative to short-term bonds, long-term bonds have less interest rate risk but more reinvestment rate risk.
b. Relative to short-term bonds, long-term bonds have more interest rate risk and more reinvestment risk.
c. Relative to coupon-bearing bonds, zero coupon bonds have more interest rate risk but less reinvestment rate risk.
d. If interest rates increase, all bond prices will increase, but the increase will be greatest for bonds that have less interest rate risk.
e. One advantage of zero coupon bonds is that you don’t have to pay any taxes until you sell the bond or it matures.







Answer: C