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Question;11. Brown;Enterprises? bonds currently sell for \$1,025.They have a 9-year maturity, an annual coupon of;\$80, and a par value of \$1,000.What is their yield to maturity?;a. 6.87%;b. 7.03%;c. 7.21%;d. 7.45%;e7.61%;12. Highfield Inc's;bonds currently sell for \$1,275 and have a par value of \$1,000.They pay a \$120 annual coupon and have a 20-year;maturity, but they can be called in 5 years at \$1,120.What is their yield to call (YTC)?;a. 7.00%;b. 7.13%;c. 7.28%;d.7.31%;e. 7.42%;13. Moussawi Ltd's;outstanding bonds have a \$1,000 par value, and they mature in 5 years.Their yield to maturity is 9%, based on;semiannual compounding, and the current market price is \$853.61.What is the bond's annual coupon interest rate?;a. 5.10%;b. 5.20%;c.5.30%;d. 5.40%;e. 5.50%;14. 14. Which of the;following statements is CORRECT?;a. The shorter the time to maturity, the greater the change;in the value of a bond in response to a given change in interest rates.;b. The longer the time to maturity, the smaller the change in;the value of a bond in response to a given change in interest rates.;c. The time to maturity does not affect the change in the;value of a bond in response to a given change in interest rates.;d.You hold a 10-year, zero coupon, bond and a 10-year bond that has;a 6% annual coupon. The same market rate, 6%, applies to both;bonds. If the market rate rises from the current level, the zero;coupon bond will experience the larger percentage decline.;e. You hold a 10-year, zero coupon, bond and a 10-year bond;that has a 6% annual coupon. The same market rate, 6%, applies to;both bonds. If the market rate rises from the current level, the;zero coupon bond will experience the smaller percentage decline.;15. Which of the following would be most likely to increase the;coupon rate that is required to enable a bond to be issued at par?;a. Adding a call;provision.;b. Adding additional restrictive covenants that limit;management's actions.;c. Adding a sinking;fund.;d. The rating;agencies change the bond's rating from Baa to Aaa.;e. Making the bond a first mortgage bond rather than a;debenture.;16. A 12-year bond has an annual coupon;rate of 9%. The coupon rate will remain fixed until the bond;matures. The bond has a yield to maturity of 7%. Which of;the following statements is CORRECT?;a. The bond is currently selling at a price;below its par value.;b.If market interest rates decline, the price of;the bond will also decline.;c.If market interest rates remain unchanged, the;bond?s price one year from now will be lower than it is today.;d.If market interest rates remain unchanged, the;bond?s price one year from now will be higher than it is today.;e. The bond;should currently be selling at its par value.;17.What annual payment must you receive in order to earn a 6.5% rate;of return on a perpetuity that has a cost of \$1,250?;a. \$77.19;B. \$81.25;c. \$85.31;d. \$89.58;e. \$94.06;18. You sold a car and accepted a note;with the following cash flow stream as your payment. What was the;effective price you received for the car assuming an interest rate of 6.0%?;Years;0;1 2;3;4;CFs;\$0 \$1,000;\$2,000 \$2,000;\$2,000;a. \$5,987;b. \$6,286;c. \$6,600;d. \$6,930;e.\$7,277

Paper#44745 | Written in 18-Jul-2015

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