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LOS d: Explain how the price of a bond changes as the bond approaches its maturity date, and compute the change in value that is attributable to the passage of time.
Q1. If a bond sells at a discount and market rates are expected to stay the same until maturity, the price of the bond will:
A) increase over time, approaching the par value minus the final interest payment at maturity.
B) increase over time, approaching the par value at maturity.
C) remain constant until maturity.
Q2. Consider a bond that pays an annual coupon of 5% and that has three years remaining until maturity. Assume the term structure of interest rates is flat at 6%. If the term structure of interest rates does not change over the next twelve-month interval, the bond's price change (as a percentage of par) will be closest to:
A) 0.84.
B) -0.84.
C) 0.00.
Q3. If market rates do not change, as time passes the price of a zero-coupon bond will:
A) approach the purchase price.
B) approach zero.
C) approach par.
Q4. A discount bond (nothing changes except the passage of time):
A) falls in value as time passes.
B) rises in value as time passes.
C) price is not related to time passing.
Q5. An investor buys a 20-year, 10% semi-annual bond for $900. She wants to sell the bond in 6 years when she estimates yields will be 10%. What is the estimate of the future price?
A) $1,000.
B) $1,079.
C) $946.
Q6. A 5-year bond with a 10% coupon has a present yield to maturity of 8%. If interest rates remain constant one year from now, the price of the bond will be:
A) lower.
B) the same.
C) higher.
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发表于 2009-3-2 17:59
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