Chapter 14

If a 7% coupon bond is trading for $975.00, it has a current yield of ____________ percent. 

• 7.00

• 6.53

• 8.53

• 7.18

The invoice price of a bond that a buyer would pay is equal to 

• the asked price plus accrued interest.
  
  

• the asked price less accrued interest.

• the bid price plus accrued interest.

• the bid price less accrued interest.

A coupon bond is reported as having an ask price of 113% of the $1,000 par value in the Wall Street Journal. If the last interest payment was made two months ago and the coupon rate is 12%, the invoice price of the bond will be ____________. 

• $1,100

• $1,200

• $1,150

• $1,160

The ______ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity. 

• current yield

• dividend yield
  
  

• yield to maturity
  
  

• discount yield

A coupon bond that pays interest semi-annually is selling at par value of $1,000, matures in 7 years, and has a coupon rate of 8.6%. The yield to maturity on this bond is: 

• 8.0%

• 8.6%

• 9.0%

• 10.0%

A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 10%. The intrinsic value of the bond today will be ______ if the coupon rate is 7%. 

• $712.99

• . $620.92

• $1,123.01

• $886.28

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pays interest of $120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 10%,

• both bonds will increase in value, but bond A will increase more than bond B

• both bonds will increase in value, but bond B will increase more than bond A
  
  

• both bonds will decrease in value, but bond A will decrease more than bond B

• both bonds will decrease in value, but bond B will decrease more than bond A

Ceteris paribus, the price and yield on a bond are 

• positively related.
  
  

• negatively related.
  
  

• sometimes positively and sometimes negatively related.
  
  

• indefinitely related.

The _________ gives the number of shares for which each convertible bond can be exchanged. 

• conversion ratio

• current ratio

• conversion premium

• convertible floor