【正文】 _______ if the coupon rate is 12%. A) $ B) $ C) $1, D) $1, E) none of the above Answer: C Difficulty: Moderate Rationale: FV = 1000, PMT = 120, n = 5, i = 10, PV = 30. A coupon bond that pays interest semiannually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be __________ if the coupon rate is 8%. A) $ B) $ C) $1, D) $1, E) none of the above Answer: A Difficulty: Moderate Rationale: FV = 1000, PMT = 40, n = 10, i = 5, PV = Chapter 14 Bond Prices and Yields 307 31. A coupon bond that pays interest semiannually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be ________ if the coupon rate is 12%. A) $ B) $ C) $1, D) $1, E) none of the above Answer: D Difficulty: Moderate Rationale: FV = 1000, PMT = 60, n = 10, i = 5, PV = 32. A coupon bond that pays interest of $100 annually has a par value of $1,000, matures in 5 years, and is selling today at a $72 discount from par value. The yield to maturity on this bond is __________. A) % B) % C) % D) % E) none of the above Answer: C Difficulty: Moderate Rationale: FV = 1000, PMT = 100, n = 5, PV = 928, i = % 33. You purchased an annual interest coupon bond one year ago that now has 6 years remaining until maturity. The coupon rate of interest was 10% and par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. The amount you paid for this bond one year ago was A) $1,. B) $1,. C) $1,. D) $. E) $1,. Answer: E Difficulty: Moderate Rationale: FV = 1000, PMT = 100, n = 7, i = 8, PV = Chapter 14 Bond Prices and Yields 308 34. You purchased an annual interest coupon bond one year ago that had 6 years remaining to maturity at that time. The coupon interest rate was 10% and the par value was $1,000. At the time you purchased the bond, the yield to maturity was 8%. If you sold the bond after receiving the first interest payment and the yield to maturity continued to be 8%, your annual total rate of return on holding the bond for that year would have been _________. A) % B) % C) % D) % E) none of the above Answer: C Difficulty: Difficult Rationale: FV = 1000, PMT = 100, n = 6, i = 8, PV = 。 give the investor the ability to benefit from interest rate changes D) maximize the holders39。s stock C) minimize the holders39。 interest rate risk。 give the investor the ability to share in the price appreciation of the pany39。 Xerox: 7. 9% % = %. 26. Floatingrate bonds are designed to ___________ while convertible bonds are designed to __________. A) minimize the holders39。 a Treasury bond due in 5 years has a yield of %. A bond issued by Xerox due in 5 years has a yield of %。 a bond issued by Mobil due in one year has a yield of %. The default risk premiums on the bonds issued by Mobil and Lucent Technologies, respectively, are: A) % and % B) % and .7% C) % and % D) % and % E) none of the above Answer: A Difficulty: Moderate Rationale: Mobil: % % = %。 Ford: % % = %. 24. A Treasury bond due in one year has a yield of %。 a Treasury bond due in 5 years has a yield of %. A bond issued by Ford Motor Company due in 5 years has a yield of %。 the price of bond as a straight bond provides the floor. The other terms are not specifically relevant to convertible bonds. 20. A coupon bond is a bond that _________. A) pays interest on a regular basis (typically every six months) B) does not pay interest on a regular basis but pays a lump sum at maturity C) can always be converted into a specific number of shares of mon stock in the issuing pany D) always sells at par E) none of the above Answer: A Difficulty: Easy Rationale: A coupon bond will pay the coupon rate of interest on a semiannual basis unless the firm defaults on the bond. Convertible bonds are specific types of bonds. 21. A ___________ bond is a bond where the bondholder has the right to cash in the bond before maturity at a specified price after a specific date. A) callable B) coupon C) put D) Treasury E) zerocoupon Answer: C Difficulty: Easy Rationale: Any bond may be redeemed prior to maturity, but all bonds other than put bonds are redeemed at a price determined by the prevailing interest rates. Chapter 14 Bond Prices and Yields 304 22. Callable bonds A) are called when interest rates decline appreciably. B) have a call price that declines as time passes. C) are called when interest rates increase appreciably. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: Callable bonds often are refunded (called) when interest rates decline appreciably. The call price of the bond (approximately par and one year39。s. The D rating indicates A) the bonds are insured B) the bonds are junk bonds C) the bonds are referred to as high yield bonds D) A and B E) B and C Answer: E Difficulty: Easy Rationale: D ratings are risky bonds, often called junk bonds (or high yield bonds by those marketing such bonds). Chapter 14 Bond Prices and Yields 302 16. The bond market A) can be quite thin. B) primarily consists of a work of bond dealers in the over the counter market. C) consists of many investors on any given day. D) A and B. E) B and C. Answer: D Difficulty: Easy Rationale: The bond market, unlike the stock market, can be a very thinly traded market. In addition, most bonds are traded by dealers. 17. Ceteris paribus, the