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WorksheetsBond Valuation
Total questions: 20
Worksheet time: 11mins
Long-term bonds are ... than short-term bonds.
more liquid
less risky
less sensitive to interest rate changes
subject to more uncertainty
If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.
True
False
As a bond approaches its maturity date, its price necessarily approaches par value.
True
False
Which of the following statements is FALSE regarding bonds?
If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.
If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.
Both A and B are false.
None of the above are false.
When the price of bond is calculated below its par value, it is classified as...
classified bond
discount bond
compound bond
consideration earnings
What is a bond?
an agreement or friendship
binding security
something that binds, fastens, confines, or holds together
a type of debt a company issues to investors
When you purchase a municipal bond, you are:
buying a portion of a municipality
diversifying your portfolio
investing in an index fund
loaning money to a municipality
A bond issued by a corporation is called a ________ .
corporate bond
market share
stock option
share of stock
The rate of interest on a bond is called the ________ .
bond rate
coupon rate
discount rate
interest rate
A-15 year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? Use annually.
Equal $1,000
Under $1,000
Over $1,200
Not enough information to tell
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
What is the value of zero coupon bond sold @ 800 maturity 7 years form now discount rate 14%
5600
450
399
1000
What will the straight value of a bond with a coupon rate of 8%, and a market rate of
not enough information
at a premium
at a discount
at par (or face value)
What is a coupon?
something you use in a supermarket to decrease your cost
an asset bought in the stock market
used in the stock market to lessen the initial cost of stocks
the interest rate on a bond at the time it is issued
If a coupon rate is 10%, how much would a semi-annual coupon payment be?
$25
$50
$100
$1000
If a bond was issued with a 5% coupon rate and the market rate is now 8%, the coupon payment:
Goes up
Goes down
Stays the same
Coupon for what?
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
What will happen to the market value of a bond if interest rates rise?
market value will decrease
market value will increase
Stay the same
No idea
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
What is usually the relationship between a bond's rating and the interest rate a
the rating is the same as the rate
Higher ratings mean lower interest
there is no relationship
higher ratings mean higher interest
