All else being equal, a bond will sell at _____ when the yield to maturity is _____ the coupon rate.

• A.a higher price; greater

• B.a lower price; greater

• C.a higher price; equal

• D.at par; greater

• E.at par; less

The dirty price of a bond is defined as:

• A.clean price minus accrued interest.

• B.clean price minus any taxes payable on accrued interest.

• C.market price minus accrued interest.

• D.market price minus any taxes payable on accrued interest.

• E.quote price plus accrued interest.

The term structure of interest rates reflects:

• A.the real rate, inflation premium, interest rate risk premium, and liquidity premium.

• B.the nominal interest rate plus the interest rate risk premium.

• C.the real interest rate plus the inflation premium.

• D.the real interest rate.

• E.the pure time value of money.

Lo Sun Company offers a bond with a current market price of $1,029.75, a coupon rate of 8 percent, and a yield to maturity of 7.52 percent. The face value is $1,000. Interest is paid semi-annually. How many years until this bond matures?

• A.8.0 years

• B.8.5 years

• C.16 years

• D.17 years

• E.9.0 years

Consider a bond with a coupon rate of 8 percent, paying interest semi-annually and maturing in eight years. The current market yield on such risky bonds is 11 percent. What is the present value of a bond with a face value of $1,000?

• A.$843.07

• B.$830.58

• C.$854.08

• D.$929.17

• E.$893.30

The value of a zero-coupon bond with a face value of $1,000 over 20 years when the required market return rate is 9.6 percent, compounded semi-annually, is how much?

• A.$192.40

• B.$195.26

• C.$168.31

• D.$153.30

• E.$172.19

Chocolate and More offers a bond with a coupon rate of 6 percent, paying semi-annually, and a yield to maturity of 7.73 percent. The bonds mature in 9 years. What is the market price of a bond with a face value of $1,000?

• A.$901.86

• B.$924.26

• C.$963.88

• D.$889.29

• E.$1,008.16

Allison's wants to raise $12.4 million to expand its business. To do this, they plan to sell zero-coupon bonds with a 25-year maturity, a face value of $1,000. The bonds will be priced to yield 6.5 percent, with interest paid semiannually. The minimum number of bonds that Allison's must sell to raise $12.4 million is how many?

• A.59,864

• B.52,667

• C.61,366

• D.60,107

• E.60,435

The Fisher equation is expressed as _____ where R is the nominal rate, r is the real rate, and h is the inflation rate.

• A.R = r × h

• B.1 + R = (1 + r) / (1 + h)

• C.1 + R = (1 + r) × (1 + h)

• D.r = R × h

• E.1 + h = (1 + r) / (1 + R)

Yield to maturity:

• A.is equal to both the current yield and the coupon rate for bonds with face value.

• B.will exceed the coupon rate when the bond is selling at a premium.

• C.is expected to be realized whenever a bond is sold.

• D.can only be realized if a bond is purchased on the issue date at face value.

• E.is equal to the current yield for all annual coupon bonds.