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LOS c, (Part 1): Explain the importance of reinvestment income in generating the yield computed at the time of purchase, and calculate the amount of income required to generate that yield.
Q1. An investor purchases a 4-year, 6%, semiannual-pay Treasury note for $9,485. The security has a par value of $10,000. To realize a total dollar return equal to 7.515% (its yield to maturity), the investor must have which of the following reinvestment assumptions?
A) All payments must be reinvested at 7.515%.
B) All payments must be reinvested at more than 7.515%.
C) All payments must be reinvested at less than 7.515%.
Q2. If the promised yield is equal to the realized yield then:
A) nominal yield is smaller than the promised yield.
B) current yield is lesser than the yield to maturity.
C) the coupon payments are reinvested at the promised yield during the life of the issue.
Q3. Which of the following is an incorrect statement when zero-coupon bonds are compared to coupon-paying bonds with the same maturity? Zero-coupon bonds:
A) are less sensitive to interest rate changes.
B) have a higher duration.
C) are sold at a lower price.
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发表于 2009-3-4 09:20
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