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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%;E.7.61%;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;COR-RECT?;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;1250 *.065 = $81.25;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#51042 | Written in 18-Jul-2015

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