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LOS c: Compute the value of a bond and the change in value that is attributable to a change in the discount rate.
Q1. What is the present value of a 7% semi-annual pay corporate bond with a $1,000 face value and 20 years to maturity if it is yielding 6.375%? If a municipal bond is yielding 4.16% and an investors marginal tax rate is 35%, would the investor prefer the corporate bond or the municipal bond?
Value Investor preference
A) $1,070.09 municipal bond
B) $1,121.23 municipal bond
C) $1,070.09 corporate bond
Q2. Consider a bond that pays an annual coupon of 5% and that has three years remaining until maturity. Suppose the term structure of interest rates is flat at 6%. How much does the bond price change if the term structure of interest rates shifts down by 1% instantaneously?
A) 2.67.
B) -2.67.
C) 0.00.
Q3. What is the probable change in price of a 30-year semiannual 6.5% coupon, $1000 par value bond yielding 8% when the nominal risk-free rate changes from 5% to 4%?
A) $98.83.
B) $106.34.
C) $107.31.
Q4. If a bond's coupon is greater than the prevailing market rate on new issues, the bond is called a:
A) discount bond.
B) term bond.
C) premium bond.
Q5. Assuming the risk-free rate is 5% and the appropriate risk premium for a AAA-rated issuer is 4%, the appropriate discount rate for a 10-year Treasury note is:
A) 4%.
B) 9%.
C) 5%.
Q6. An investor has the following choices available:
- She can buy a 10% semi annual coupon, 10-year bond for $1,000.
- She can reinvest the coupons at 12%.
- She can sell the bond in three years at an estimated price of $1,050.
Based on this information, the average annual rate of return over the three years is:
A) 9.5%.
B) 11.5%.
C) 13.5%.
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发表于 2009-3-2 17:43
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