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Q7. Consider a 5-year, semiannual, 10% coupon bond with a maturity value of 1,000 selling for $1,081.11. The first call date is 3 years from now and the call price is $1,030. What is the yield-to-call?ffice ffice" />
A) 7.28%.
B) 3.91%.
C) 7.82%.
Correct answer is C)
N = 6; PMT = 50; FV = 1,030; PV = $1,081.11; CPT → I = 3.91054
3.91054 × 2 = 7.82
Q8. A 12% coupon bond with semiannual payments is callable in 5 years. The call price is $1,120. If the bond is selling today for $1,110, what is the yield-to-call?
A) 10.95%.
B) 11.25%.
C) 10.25%.
Correct answer is A)
PMT = 60; N = 10; FV = 1,120; PV = 1,110; CPT → I = 5.47546
(5.47546)(2) = 10.95
Q9. If a bond sells at a discount its:
A) current yield is greater than its YTM.
B) coupon rate is less than the market rate of interest.
C) coupon rate is greater than its current yield.
Correct answer is B)
When a bond sells at a discount, the market rate goes above the coupon rate and the bond's price falls below par. The current yield is the coupon rate / price, so as price falls below 1000 the current yield rises above the coupon rate. The YTM considers the current yield plus the capital gain associated with the discount.
Q10. Consider the purchase of an existing bond selling for $1,150. This bond has 28 years to maturity, pays a 12% annual coupon, and is callable in 8 years for $1,100.
What is the bond's yield to call (YTC)?
A) 10.05%.
B) 10.55%.
C) 9.26%.
Correct answer is A)
N = 8; PMT = 120; PV = -1,150; FV = 1,100; CPT → I/Y.
Q11. What is the bond's yield to maturity (YTM)?
A) 10.55%.
B) 10.34%.
C) 9.26%.
Correct answer is B)
N = 28; PMT = 120; PV = -1,150; FV = 1,000; CPT → I/Y.
Q12. What rate should be used to estimate the potential return on this bond?
A) 10.34%.
B) the YTC.
C) the YTM.
Correct answer is B)
The yield to call should be used since the bond could be called in the future. Because the bond is callable using yield to maturity would give a falsely increased rate of return.
Q13. What rate of return will an investor earn if they buy a 20-year, 10% annual coupon bond for $900? They plan on selling this bond at the end of five years for $951. Calculate the rate of return and the current yield at the end of five years.
Rate of return Current yield
A) 9.4% 11.00%
B) 12.0% 11.00%
C) 12.0% 10.51%
Correct answer is C)
Realized (horizon) yield = rate of return based on reinvestment rate on selling price at the end of the holding period horizon.
PV = 900; FV = 951; n = 5; PMT = 100; compute i = 12%
Current Yield = annual coupon payment / bond price
CY = 100 / $951 = 0.1051 or 10.51%
Q14. A 6% semi-annual pay bond, priced at $860 has 10 years to maturity. Find the yield to maturity and determine if the price of this bond will be lower or higher than a zero coupon bond.
YTM Compared to zero coupon bond
A) 8.07% lower price
B) 8.07% higher price
C) 4.03% higher price
Correct answer is B)
N = 2 × 10 = 20; PV = -$860.00; PMT = $30; FV = $1,000. Compute I/Y = 4.033 × 2 = 8.07%.
The price of this bond will most likely be higher than a zero coupon bond because this bond pays coupons to the holder.
[此贴子已经被作者于2009-3-3 17:57:52编辑过] | 
发表于 2009-3-3 17:36
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