Basic Finance W7 (MIT)

You just bought a six-year zero-coupon bond with a $1000 face value for $645.48. What is the yield to maturity of this bond?

You just bought a six-year zero-coupon bond with a $1000 face value for $645.48. What is the taxable capital gain on this bond next year?

A bond that grants the investor the right to exchange their bonds for ordinary shares is called a:

• zero-coupon bond

• Treasury bond

• convertible bond

• mortgage bond

Of the following bonds, which has the highest degree of interest rate risk?

• 20-year 8% bond

• Five-year 8% bond

• 10-year 8% bond

• There is not enough information to answer the question.

A one-year bond offers a yield of 5% and a two-year bond offers a yield of 4.5%. Under the expectations theory what should be the yield on a one-year bond next year?

• 13.50%

• 4.52%

• 4.00%

• 9.02%

Which of the following information cannot be found in a bond's indenture?

• The coupon rate

• The maturity of the bond

• The price of the bond

• The seller of the bond

You just bought a bond with a yield to maturity of 8.5%. If the rate of inflation is expected to be 4.5 %, what is the real return on your investment?

• 9.50%

• 5.29%

• 3.83%

• There is not enough information to answer the question.

If the real return is 8% and the expected rate of inflation is 3.5%, what is the nominal rate?

• 4.50%

• 14.95%

• 10.00%

• 11.78%

A two-year bond offers a yield of 5% and a three-year bond offers a yield of 4.5%. Under the expectations theory what should be the yield on a one-year bond in two years?

• 5.95%

• 10.56%

• 3.51%

• 12.49%

A 15-year 9% bond with a face value of $1000 is currently trading at $958. The yield to maturity of this bond:

• must be greater than 9%

• must be to 9%

• must be less than 9%

• is unknown