答案和详解如下： 1.Which of the following statements is FALSE? Compared to a callable bond, a noncallable bond: A) is more attractive to an investor concerned with reinvestment risk. B) has more predictable cash flows. C) has greater price appreciation potential. D) provides a higher yield. The correct answer was D) When compared to a callable bond, the yield on a noncallable bond is less. With a noncallable bond, the issuer does not have to compensate the investor for call risk/cash flow uncertainty with any premium. The other choices are true. Call risk is the combination of cash flow uncertainty and reinvestment risk. When a bond is called, the investor faces a disruption in cash flow and a reduced rate of return. The call price serves as a cap on the value of the bond and thus reduces price appreciation potential.
2.Price compression:
A) occurs when a bond's cap and floor are set close together. B) occurs when demand for a bond is high near the first call date. C) reduces the potential for price appreciation. D) benefits the investor. The correct answer was C) When a bond has a call provision, the potential for price appreciation is reduced, because the call caps the price of the bond near the call price, even if interest rates fall considerably. It is unlikely that investors would pay a price that exceeds the call price. Price compression benefits the issuer, because it allows the issuer to call the bond if interest rates decrease allowing the issuer to replace the existing debt with lower cost debt.
3.Which of the following statements about callable bonds is TRUE?
A) A bondholder usually gains if a bond is called. B) As interest rates decrease, the value to the investor of the call option increases. C) As interest rates fall, the value of a callable bond will exceed that of a similar straight bond. D) When yields rise, the value of a callable bond is less sensitive and will exhibit less of a price change than a noncallable bond. The correct answer was D) When yields rise, the value of callable bond may not fall as much as that of a similar straight bond because of the embedded call option feature. With a decrease in interest rates, the value of a callable bond can increase to only approximately the call value (the call price serves as a cap or “ceiling.”). Straight bonds will continue to exhibit the inverse relationship between yields and prices, as there is no “ceiling” call price. A bondholder will most likely lose if a bond is called, because a bond is most likely to be called in a declining interest rate environment. The issuer will likely call the bond and replace it with lower cost (lower coupon debt). The holder faces prepayment and reinvestment risk, because he must reinvest the bond cash flows into lower-yielding current investments. The statement that begins, “As interest rates decrease…,” should continue, “.. the value to the issuer of the call option increases.” As interest rates decrease, the issuer values the call option more because the company has the potential to call the bond and replace existing debt with lower-coupon (and thus lower cost) debt. | 
发表于 2008-4-8 15:45
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