投资学第7版Test-Bank答案

MultipleChoiceQuestions1.Thecurrentyieldonabondisequalto________.A)annualinterestdividedbythecurrentmarketpriceB)theyieldtomaturityC)annualinterestdividedbytheparvalueD)theinternalrateofreturnE)noneoftheaboveAnswer:ADifficulty:EasyRationale:Aiscurrentyieldandisquotedassuchinthefinancialpress.2.Ifa7%couponbondistradingfor$975.00,ithasacurrentyieldof____________percent.A)7.00B)6.53C)7.24D)8.53E)7.18Answer:EDifficulty:EasyRationale:70/975=7.18.3.Ifa6%couponbondistradingfor$950.00,ithasacurrentyieldof____________percent.A)6.5B)6.3C)6.1D)6.0E)6.6Answer:BDifficulty:EasyRationale:60/950=6.3.4.Ifan8%couponbondistradingfor$1025.00,ithasacurrentyieldof____________percent.A)7.8B)8.7C)7.6D)7.9E)8.1Answer:ADifficulty:EasyRationale:80/1025=7.8.5.Ifa7.5%couponbondistradingfor$1050.00,ithasacurrentyieldof____________percent.A)7.0B)7.4C)7.1D)6.9E)6.7Answer:CDifficulty:EasyRationale:75/1050=7.1.6.Acouponbondpaysannualinterest,hasaparvalueof$1,000,maturesin4years,hasacouponrateof10%,andhasayieldtomaturityof12%.Thecurrentyieldonthisbondis___________.A)10.65%B)10.45%C)10.95%D)10.52%E)noneoftheaboveAnswer:ADifficulty:ModerateRationale:FV=1000,n=4,PMT=100,i=12,PV=939.25;$100/$939.25=10.65%.7.Acouponbondpaysannualinterest,hasaparvalueof$1,000,maturesin12years,hasacouponrateof11%,andhasayieldtomaturityof12%.Thecurrentyieldonthisbondis___________.A)10.39%B)10.43%C)10.58%D)10.66%E)noneoftheaboveAnswer:DDifficulty:ModerateRationale:FV=1000,n=12,PMT=110,i=12,PV=938.06;$100/$938.06=10.66%.8.Ofthefollowingfourinvestments,________isconsideredthesafest.A)commercialpaperB)corporatebondsC)U.S.AgencyissuesD)TreasurybondsE)TreasurybillsAnswer:EDifficulty:EasyRationale:OnlyTreasuryissuesareinsuredbytheU.S.government;theshorter-termtheinstrument,thesafertheinstrument.9.Toearnahighratingfromthebondratingagencies,afirmshouldhaveA)alowtimesinterestearnedratioB)alowdebttoequityratioC)ahighquickratioD)BandCE)AandCAnswer:DDifficulty:EasyRationale:Highvaluesforthetimesinterestandquickratiosandalowdebttoequityratioaredesirableindicatorsofsafety.10.Atissue,couponbondstypicallysell________.A)aboveparvalueB)belowparC)atornearparvalueD)atavalueunrelatedtoparE)noneoftheaboveAnswer:CDifficulty:EasyRationale:Iftheinvestmentbankerhasappraisedthemarketandthequalityofthebondcorrectly,thebondwillsellatornearpar(unlessinterestrateshavechangedverydramaticallyandveryquicklyaroundthetimeofissuance).11.AccruedinterestA)isquotedinthebondpriceinthefinancialpress.B)mustbepaidbythebuyerofthebondandremittedtothesellerofthebond.C)mustbepaidtothebrokerfortheinconvenienceofsellingbondsbetweenmaturitydates.D)AandB.E)AandC.Answer:BDifficulty:ModerateRationale:Accruedinterestmustbepaidbythebuyer,butisnotincludedinthequotationspageprice.12.TheinvoicepriceofabondthatabuyerwouldpayisequaltoA)theaskedpriceplusaccruedinterest.B)theaskedpricelessaccruedinterest.C)thebidpriceplusaccruedinterest.D)thebidpricelessaccruedinterest.E)thebidprice.Answer:ADifficulty:EasyRationale:Thebuyerofabondwillbuyattheaskedpriceandwillalsobeinvoicedforanyaccruedinterestduetotheseller.13.An8%couponU.S.TreasurynotepaysinterestonMay30andNovember30andistradedforsettlementonAugust15.Theaccruedinterestonthe$100,000facevalueofthisnoteis_________.A)$491.80B)$800.00C)$983.61D)$1,661.20E)noneoftheaboveAnswer:DDifficulty:ModerateRationale:76/183($4,000)=$1,661.20.Approximation:.08/12*100,000=666.67permonth.666.67/month*2.5months=1.666.67.14.Acouponbondisreportedashavinganaskpriceof113%ofthe$1,000parvalueintheWallStreetJournal.Ifthelastinterestpaymentwasmadetwomonthsagoandthecouponrateis12%,theinvoicepriceofthebondwillbe____________.A)$1,100B)$1,110C)$1,150D)$1,160E)noneoftheaboveAnswer:CDifficulty:ModerateRationale:$1,130+$20(accruedinterest)=$1,150.15.ThebondsofFordMotorCompanyhavereceivedaratingofDbyMoody's.TheDratingindicatesA)thebondsareinsuredB)thebondsarejunkbondsC)thebondsarereferredtoashighyieldbondsD)AandBE)BandCAnswer:EDifficulty:EasyRationale:Dratingsareriskybonds,oftencalledjunkbonds(orhighyieldbondsbythosemarketingsuchbonds).16.ThebondmarketA)canbequitethin.B)primarilyconsistsofanetworkofbonddealersintheoverthecountermarket.C)consistsofmanyinvestorsonanygivenday.D)AandB.E)BandC.Answer:DDifficulty:EasyRationale:Thebondmarket,unlikethestockmarket,canbeaverythinlytradedmarket.Inaddition,mostbondsaretradedbydealers.17.Ceterisparibus,thepriceandyieldonabondareA)positivelyrelated.B)negativelyrelated.C)sometimespositivelyandsometimesnegativelyrelated.E)notrelated.E)indefinitelyrelated.Answer:BDifficulty:EasyRationale:Bondpricesandyieldsareinverselyrelated.18.The______isameasureoftheaveragerateofreturnaninvestorwillearniftheinvestorbuysthebondnowandholdsuntilmaturity.A)currentyieldB)dividendyieldC)P/EratioD)yieldtomaturityE)discountyieldAnswer:DDifficulty:EasyRationale:Thecurrentyieldistheannualinterestasapercentofcurrentmarketprice;theotherchoicesdonotapplytobonds.19.The_________givesthenumberofsharesforwhicheachconvertiblebondcanbeexchanged.A)conversionratioB)currentratioC)P/EratioD)conversionpremiumE)convert