Chapter 10 Bond Prices and Yields
1. Which one of the following is the correct definition of a coupon rate?
A. semi-annual interest payment/par value
B. annual interest/par value
C. annual interest/market value
D. semi-annual coupon/bond price
E. annual coupon/bond price
See Section 10.1
Blooms: Knowledge
Jordan - Chapter 10 #1
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Coupon Rate
2. What is the annual interest divided by the market price of a bond called?
A. coupon rate
B. effective annual yield
C. current yield
D. yield to maturity
E. yield to market
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #2
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Current Yield
3. The yield to maturity is the:
A. discount rate that equates a bond's price with the present value of the
bond's future cash flows.
B. rate you will earn if your bond is called on the earliest possible date.
C. rate computed by dividing the annual interest by the par value.
D. rate used to compute the amount of each interest payment.
E. rate computed as the annual interest divided by the market value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #3
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.2
Topic: Yield to Maturity
4. A premium bond is defined as a bond that:
A. has a duration that is less than 1.0.
B. has a face value that exceeds its market value.
C. is callable at a price which exceeds the face value.
D. has a market price that exceeds par value.
E. is selling for less than face value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #4
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.2
Topic: Premium Bond
5. A discount bond:
A. pays a variable coupon payment.
B. has a market price in excess of face value.
C. has a duration that is less than that required by an investor.
D. has a par value that is less than $1,000.
E. has a face value that exceeds the market value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #5
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.2
Topic: Discount Bond
6. The price of a bond, net of accrued interest, is referred to as the bond's:
A. dirty price.
B. par value.
C. clean price.
D. maturity value.
E. discount value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #6
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.2
Topic: Clean Price
7. The dirty price of a bond is the:
A. invoice price.
B. quoted price.
C. issue price.
D. average of the bid and asked prices.
E. dealer purchase price.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #7
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.2
Topic: Dirty Price
8. A callable bond:
A. can be paid off early at either the issuer's or the bondholder's request.
B. can be redeemed early if the bondholder so requests.
C. can have its maturity date extended by the issuer.
D. can be redeemed by the issuer prior to maturity.
E. is a bond that pays a variable interest payment.
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #8
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.3
Topic: Callable Bond
9. Which one of the following does an issuer pay to redeem a bond prior to
maturity?
A. par value
B. face value
C. put price
D. call price
E. discounted price
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #9
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.3
Topic: Call Price
10. Which one of the following prices is equal to the present value of a bond's
future cash flows and is
paid when a bond is redeemed prior to maturity?
A. call protected
B. face value
C. make-whole call
D. tender-offer
E. deferred
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #10
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.3
Topic: Make-Whole Call Price
11. An issuer has a bond outstanding that matures in 18 years. Which one of
the following prevents the
issuer from buying back that bond today?
A. make-whole provision
B. call protection period
C. newly issued provision
D. put provision
E. call premium
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #11
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.3
Topic: Call Protection Period
12. The yield that a bond will earn given that it is bought back by the issuer at
the earliest possible date is
the:
A. market yield.
B. current yield.
C. yield to maturity.
D. yield to put.
E. yield to call.
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #12
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.3
Topic: Yield to Call
13. Which one of the following is the risk that market interest rates may
increase causing the price of a
bond to decline?
A. inflation risk
B. reinvestment risk
C. yield risk
D. interest rate risk
E. default risk
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #13
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.4
Topic: Interest Rate Risk
14. The rate of return an investor actually earns from owning a bond is called
which one of the following?
A. market return
B. realized yield
C. annualized coupon yield
D. maturity yield
E. call yield
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #14
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.4
Topic: Realized Yield
15. Which one of the following measures a bond's sensitivity to changes in
market interest rates?
A. yield to call
B. yield to market
C. duration
D. immunization
E. target date valuation
See Section 10.5
Blooms: Knowledge
Jordan - Chapter 10 #15
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.5
Topic: Duration
16. A change in a bond's price caused by which one of the following is defined
as the dollar value of an
01?
A. change in yield to call due to passage of one year
B. change in yield to maturity of one percent
C. change in yield to maturity of one basis point
D. change in coupon rate of one percent
E. change in coupon rate of one basis point
See Section 10.6
Blooms: Knowledge
Jordan - Chapter 10 #16
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.6
Topic: Dollar Value of an 01
17. The yield value of a 32nd is the change needed in which one of the
following to cause a bond's price to
change by 1/32nd?
A. current yield
B. yield to maturity
C. coupon rate
D. call premium
E. call date
See Section 10.6
Blooms: Knowledge
Jordan - Chapter 10 #17
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.6
Topic: Yield Value of a 32nd
18. A dedicated portfolio is a bond portfolio created to:
A. maximize current interest income.
B. provide an increasing steady stream of income.
C. maximize the return given declining interest rates.
D. fund a future cash outlay.
E. avoid taxation.
See Section 10.7
Blooms: Knowledge
Jordan - Chapter 10 #18
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.7
Topic: Dedicated Portfolio
19. Which one of the following risks is associated with investing a coupon
payment at a rate that is lower
than the bond's yield-to-maturity?
A. reinvestment rate risk
B. current rate risk
C. payment risk
D. current yield risk
E. maturity risk
See Section 10.7
Blooms: Knowledge
Jordan - Chapter 10 #19
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.7
Topic: Reinvestment Rate Risk
20. Which one of the following involves creating a portfolio in a manner which
minimizes the uncertainty
of the portfolio's maturity target date value?
A. duration
B. reinvestment
C. immunization
D. modification
E. call protection
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #20
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.8
Topic: Immunization
21. Price risk is the risk that:
A. coupon payments will be reinvested at a rate that is less than the bond's
yield-to-maturity.
B. the bond principal will not be paid in full or on time.
C. the bonds in a dedicated portfolio will decrease in value in response to an
increase in interest rates.
D. market prices increase due to market interest rate changes making bonds
more expensive to
purchase.
E. the yield-to-maturity will be less than the inflation risk causing the real rate
of return to be
negative.
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #21
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.8
Topic: Price Risk
22. Periodically rebalancing a portfolio so that the duration continues to
match the target date is
called:
A. risk assessment.
B. duration testing.
C. dedication matching.
D. portfolio matching.
E. dynamic immunization.
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #22
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.8
Topic: Dynamic Immunization
23. A basic bond that has a face value of $1,000 and pays regular semiannual
coupon payments is referred
to as which one of the following?
A. pure discount bond
B. premium bond
C. inflation bond
D. straight bond
E. conversion bond
See Section 10.1
Blooms: Knowledge
Jordan - Chapter 10 #23
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Straight Bonds
24. Which of the following will increase if the coupon rate increases?
I. face value
II. market value
III. yield-to-maturity
IV. current yield
A. I and II only
B. III and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
See Section 10.1
Blooms: Knowledge
Jordan - Chapter 10 #24
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Coupon Rate
25. Which one of the following will decrease the current yield of a bond?
A. increase in the face value
B. change from semi-annual to annual coupon payments
C. decrease in the call premium
D. decrease in the coupon rate
E. decrease in the bond price
See Section 10.1
Blooms: Knowledge
Jordan - Chapter 10 #25
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Current Yield
26. Which one of the following will occur if a bond's discount rate is lowered?
A. market price will increase
B. coupon payment amount will decrease
C. current yield will increase
D. call premium will increase
E. coupon rate will decrease
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #26
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.2
Topic: Interest Rate Risk
27. Which one of the following statements is correct concerning premium
bonds?
A. The premium increases when interest rates increase.
B. The coupon rate is less than the current yield.
C. As the time to maturity decreases, the premium increases.
D. The yield to maturity is less than the coupon rate.
E. The par value exceeds the face value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #27
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.2
Topic: Premium Bond
28. Which one of the following statements is correct concerning discount
bonds?
A. The current yield is less than the yield to maturity.
B. The bonds will be redeemed at maturity for less than face value.
C. The coupon rate is greater than the current yield.
D. The clean price is greater than the dirty price.
E. Only zero-coupon bonds sell at a discount.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #28
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.2
Topic: Discount Bond
29. Which one of the following statements applies to a par value bond?
A. The current yield is less than the coupon rate.
B. The yield-to-maturity equals the risk-free, or Treasury bill, rate.
C. The par value exceeds the market price.
D. The current yield, coupon rate, and yield-to-maturity are equal.
E. The dirty price equals the clean price.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #29
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.2
Topic: Par Bond
30. Assuming there is no default risk, both a premium bond and a discount
bond must share which one of
the following characteristics?
A. market price less than a par value bond
B. yield-to-maturity less than the coupon rate
C. maturity value equal to a par value bond
D. current yield equal to that of a par value bond
E. coupon rate exceeding the yield-to-maturity
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #30
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.2
Topic: Par Bond
31. A bond has a current yield that is equal to the yield-to-maturity. Given this,
which one of the
following must also be true?
A. The bond must pay annual interest.
B. The maturity value must be greater than the bond price.
C. The bond can have any maturity date.
D. The coupon rate must exceed the current yield.
E. The price must exceed the par value.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #31
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.2
Topic: Par Bond
32. For a premium bond, the:
A. current yield is equal to the coupon rate but less than the yield to maturity.
B. yield to maturity exceeds both the coupon rate and the current yield.
C. coupon rate is equal to the yield to maturity but less than the current yield.
D. current yield is less than either the coupon rate or the yield to maturity.
E. coupon rate exceeds both the yield to maturity and the current yield.
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #32
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.2
Topic: Yield Measures
33. Davis Industrial bonds have a current market price of $990 and a 6
percent coupon. The bonds pay
interest semi-annually on March 1 and September 1. Assume today is January
1. How many months of
accrued interest are included in the dirty price of these bonds?
A. zero
B. two
C. three
D. four
E. five
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #33
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.2
Topic: Dirty Price
34. A bond pays interest semiannually on February 1 and August 1. Assume
today is October 1. How
many months of accrued interest are included in the clean price of this bond?
A. zero
B. two
C. three
D. four
E. five
See Section 10.2
Blooms: Knowledge
Jordan - Chapter 10 #34
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.2
Topic: Clean Price
35. The yield-to-maturity assumes which one of the following?
A. The bond is purchased at par value.
B. All interest payments earn the latest rate of market interest.
C. The bond is called on the earliest possible date.
D. The bond is a pure discount bond.
E. All coupon payments are reinvested at the yield-to-maturity rate.
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #35
Learning Objective: 10-02 The importance of yield to maturity.
Level of Difficulty: Core
Section: 10.3
Topic: Yield to Maturity
36. Which one of the following increases the probability that a bond will be
called?
A. The call premium is relatively high.
B. The bond is within the call protection period.
C. The bond was issued within the past year.
D. Market interest rates decline.
E. The bond is selling at par.
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #36
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.3
Topic: Callable Bond
37. Which one of the following statements is correct concerning a callable
bond that is currently selling
below face value? Assume there is no risk of default. Also assume the issuer
only calls bonds when
they can be refinanced at a lower rate of interest.
A. The bond will most likely be called while the bonds are selling at a discount.
B. The yield-to-maturity is presently more relevant to an investor than the
yield-to-call.
C. The bond is likely going to be called due to the low current interest rates.
D. The bond is currently paying a premium.
E. The bond issue will most likely be replaced with a new bond issue.
See Section 10.3
Blooms: Knowledge
Jordan - Chapter 10 #37
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.3
Topic: Yield to Call
38. Which one of the following statements is correct?
A.
Investors know the rate of return they will earn with certainty provided they
hold bonds until they
mature.
B. Reinvestment risk causes realized yields to differ from promised yields.
C. Realized yields generally equal promised yields as long as a bond is not
called.
D. Redeeming a bond early helps ensure an investor earns the promised yield.
E. Realized yields cannot exceed promised yields.
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #38
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Intermediate
Section: 10.4
Topic: Realized Yield
39. According to Malkiel's theorems, bond prices and bond yields are:
A. inversely related.
B. uncorrelated.
C. positively related.
D. directly related.
E. independent of each other.
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #39
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.4
Topic: Malkiels Theorems
40. Which combination of bond characteristics causes a bond to be most
sensitive to changes in market
interest rates?
I. low coupon rates
II. high coupon rates
III. short time to maturity
IV. long time to maturity
A. III only
B. I and III only
C. I and IV only
D. II and III only
E. II and IV only
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #40
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Core
Section: 10.4
Topic: Malkiels Theorems
41. How does the size of the change in a bond's price react in response to a
given change in the yield to
maturity as the time to maturity increases?
A. decreases at an increasing rate
B. decreases at a diminishing rate
C. increases at a constant rate
D. increases at a diminishing rate
E. increases at an increasing rate
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #41
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Intermediate
Section: 10.4
Topic: Malkiels Theorems
42. Which one of the following statements is correct according to Malkiel's
Theorems?
A.
For a given change in a bond's yield to maturity, the shorter the term to
maturity, the greater will be
the magnitude of the change in the bond's price.
B. The price of an outstanding bond is unaffected by changes in market
interest rates.
C.
The size of the change in a bond's price increases at a constant rate given even
incremental increases
in a bond's yield-to-maturity even as the term to maturity lengthens.
D.
For a given change in a bond's yield-to-maturity, the absolute magnitude of
the resulting change in
the bond's price is directly related to the bond's coupon rate.
E
.
For a given absolute change in a bond's yield-to-maturity, a decrease in yield
will cause a greater
change in the bond's price than will an increase in yield.
See Section 10.4
Blooms: Knowledge
Jordan - Chapter 10 #42
Learning Objective: 10-04 How to measure the impact of interest rate changes on bond prices.
Level of Difficulty: Intermediate
Section: 10.4
Topic: Malkiels Theorems
43. Which one of the following must be equal for two bonds if they are to have
similar changes in their
prices given a relatively small change in bond yields?
A. coupon payment
B. time to maturity
C. market price
D. duration
E. current yield
See Section 10.5
Blooms: Knowledge
Jordan - Chapter 10 #43
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.5
Topic: Macaulay Duration
44. All else constant, which of the following will decrease the Macaulay
duration of a straight bond?
I. reducing the coupon payment
II. shortening the time to maturity
III. lowering the yield to maturity
A. I only
B. II only
C. II and III only
D. I and II only
E. I and III only
See Section 10.5
Blooms: Knowledge
Jordan - Chapter 10 #44
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.5
Topic: Macaulay Duration
45. Which one of the following statements is correct concerning Macaulay
duration?
A. The duration of a zero coupon bond is equal to the time to maturity.
B. Most bonds have durations in excess of 15 years.
C. The duration of a coupon bond is a linear function between the time to
maturity and the duration.
D. The duration of a coupon bond is greater than that of a zero coupon bond
given equal maturity
dates.
E.
The percentage change in a bond's price is approximately equal to the change
in the yield to
maturity multiplied by (-1 × Macaulay duration).
See Section 10.5
Blooms: Knowledge
Jordan - Chapter 10 #45
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Intermediate
Section: 10.5
Topic: Macaulay Duration
46. The modified duration:
A. is equal to the Macaulay duration divided by (1 + Yield to maturity).
B.
multiplied by (-1 × Change in the yield to maturity) equals the approximate
percentage change in a
bond's price.
C. will be the same for any bonds that have equal times to maturity.
D. only applies to pure discount securities.
E. must be converted to a Macaulay duration before computing the percentage
change in a bond's
price.
See Section 10.5
Blooms: Knowledge
Jordan - Chapter 10 #46
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.5
Topic: Modified Duration
47. To immunize your portfolio, you should:
A. avoid callable bonds.
B. match bond maturity dates to your target dates.
C. match bond durations to your target dates.
D. purchase only par value bonds.
E. purchase only high-coupon bonds.
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #47
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.8
Topic: Immunization
48. Last year, you created an immunized portfolio with an average maturity
date of 14.5 years, a yield-tomaturity
of 9.8 percent, and a duration of 9.6 years. According to the policy of dynamic
immunization,
you should now modify your portfolio in which one of the following ways?
A. modify the yield-to-maturity to 9.1 percent
B. modify the portfolio so the average maturity remains at 14.5 years
C. modify the portfolio so the average maturity becomes 13.5 years
D. modify the portfolio so the duration remains at 9.6 years
E. modify the portfolio so the duration becomes 8.6 years
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #48
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.8
Topic: Dynamic Immunization
49. Dynamic immunization is primarily aimed at reducing which one of the
following risks?
A. default
B. liquidity
C. reinvestment
D. inflation
E. taxation
See Section 10.8
Blooms: Knowledge
Jordan - Chapter 10 #49
Learning Objective: 10-03 Interest rate risk and Malkiels theorems.
Level of Difficulty: Core
Section: 10.8
Topic: Dynamic Immunization
50. A bond pays semiannual interest payments of $37.50. What is the coupon
rate if the par value is
$1,000?
A. 3.75 percent
B. 4.50 percent
C. 6.80 percent
D. 7.50 percent
E. 10.38 percent
Coupon rate = ($37.50 × 2)/$1,000 = 7.50 percent
Blooms: Application
Jordan - Chapter 10 #50
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Coupon Rate
51. A bond has a face value of $1,000 and a coupon rate of 5.5 percent. What is
your annual interest
payment if you own 8 of these bonds?
A. $110
B. $220
C. $330
D. $440
E. $880
Annual coupon = $1,000 × .055 x 8 = $440
Blooms: Application
Jordan - Chapter 10 #51
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Annual Coupon
52. A bond has a par value of $1,000 and a coupon rate of 6 percent. What is
the dollar amount of each
semiannual interest payment if you own 6 of these bonds?
A. $180
B. $210
C. $320
D. $420
E. $840
Semiannual coupon = [($1,000 × .06)/2] x 6 = $180
Blooms: Application
Jordan - Chapter 10 #52
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Semiannual Coupon
53. A bond has a par value of $1,000, a market price of $1,012, and a coupon
rate of 5.75 percent. What is
the current yield?
A. 5.68 percent
B. 5.71 percent
C. 5.75 percent
D. 5.78 percent
E. 5.80 percent
Current yield = (.0575 × $1,000)/$1,012 = 5.68 percent
Blooms: Application
Jordan - Chapter 10 #53
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Current Yield
54. A 6.5 percent coupon bond has a face value of $1,000 and a current yield of
6.61 percent. What is the
current market price?
A. $983.36
B. $989.18
C. $1,011.82
D. $3,933.43
E. $4,067.47
Market price = (.065 × $1,000)/.0661 = $983.36
Blooms: Application
Jordan - Chapter 10 #54
Learning Objective: 10-01 How to calculate bond prices and yields.
Level of Difficulty: Core
Section: 10.1
Topic: Current Yield