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finance data bank




Question;8.1Bond Cash;Flows, Prices, and Yields;1);Which of the following statements is;false?;A);Bonds are a securities sold by governments;and corporations to raise money from investors today in exchange for promised;future payments.;B);By convention the coupon rate is expressed;as an effective annual rate.;C);Bonds typically make two types of payments;to their holders.;D);The time remaining until the repayment;date is known as the term of the bond.;2);Which of the following formulas is;incorrect?;A);Yield to maturity for an n-period zero-coupon bond=;B);Price of an n-period bond=;+;+...+;C);Price of an n-period bond= Coupon?;+;D);Coupon=;3);Which of the following statements is;false?;A);The IRR of an investment in a zero-coupon bond is the rate of return that investors will earn on their;money if they buy a default free bond at its current price and hold it to;maturity.;B);The yield to maturity of a bond is the;discount rate that sets the future value of the promised bond payments equal to;the current market price of the bond.;C);Financial professionals also use the term;spot interest rates to refer to the default-free zero-coupon yields.;D);When we calculate a bond's yield to;maturity by solving the formula, Price of an n-period bond=;+;+...+, the yield we compute will be a rate;per coupon interval.;4);Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity. If the bond is currently trading for $459;then the yield to maturity on this bond is closest to;A);7.5%;B);10.4%;C);9.7%;D);8.1%;Use the table for the question(s);below.;5);The yield to maturity for the two year;zero-coupon bond is closest to;A);6.0%;B);5.8%;C);5.6%;D);5.5%;6);Based upon the information provided in the;table above, you can conclude;A);that the yield curve is flat.;B);nothing about the shape of the yield;curve.;C);that the yield curve is downward sloping.;D);that the yield curve is upward sloping.;Use the table for the question(s);below.;WS1);Compute the yield to maturity for each of;the five zero-coupon bonds.;WS2);Plot the zero-coupon yield curve (for the first five years).


Paper#51195 | Written in 18-Jul-2015

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