1. What are bonds issued by cities, counties, or states called?

1.

What are bonds issued by cities, counties, or states called?

municipal bonds

samurai bonds

treasury bonds

junk bonds

2.

The required rate of return on a bond is called the

yield to maturity.

liquidity premium.

call yield.

current yield.

risk premium.

3.

The period of time for which a bond remains outstanding is called the

face value.

maturity.

issue date.

coupon date.

expiration date.

4.

Another Co. expects to issue a $1,000 face-value bond that matures in 10 years. The annual coupon rate is 8.25% and interest payments are expected to be paid annually. Similar bonds are currently priced at 98.4% of face value. Given this information, what is the required return by bond holders?

8.49%

8.77%

9.08%

9.26%

none of the above

5.

In the bond market, firms raise debt financing directly from

investors.

government agencies.

consumer banks.

loan officers.

6.

A zero-coupon bond is currently priced at $456, has a face value of $1,000, and matures in 10 years. What is the yield to maturity of this bond?

4.00%

6.54%

8.17%

9.25%

7.

If interest rates increase, then bond prices will also increase.

false

true

8.

What is the value of a bond?

the face value of the bond

the coupon payments of the bond

the future value of its cash flows

the face value of the bond plus coupon payments

the present value of its cash flows

9.

What is the price of a bond with a $1,000 face value, a coupon rate of 13% paid annually, and matures in 25 years? Your required rate of return is 7.5%.

$1,613.08

$1,198.32

$1,316.80

$1,459.75

$1,255.21

10.

Which of the following statements about a bond are true? i. A bond is a fixed-income security. ii. The bond’s interest payments vary each year with the market. iii. A bond acts like an interest-only loan.

only i

ii and iii

i and iii

i, ii, and iii

i and ii