Fin 4243 Exam 2

A bond that pays semiannual coupons has a stated yield-to-maturity for a periodicity of two- the rate per semiannual period times two.

True

when the coupon rate is greater than the market discount rate, the bond is priced at premium above par value

True

The bond price is inversely related to the market discount rate. When the market discount rate increases, the bond price decreases (the inverse effect).

True

For the same coupon rate and time-to-maturity, the percentage price change is greater (in absolute value, meaning without regard to the sign of the change) when the market discount rate goes down than when it goes up (the convexity effect).

True

When the coupon rate is more than the market discount rate, the bond is priced at a discount below par value.

False

The sum of the coupon payments received over the year divided by the current price is called:

Current Yield

Money market instruments are long-term debt securities.

False

A _____ contains an embedded call option that gives the issuer the right to buy the bond back from the investor at specified prices on pre-determined dates.

callable bond

The highest of the sequence of yields-to-call and the yield-to-maturity is called the yield-to-worst.

False

Yields-to-maturity on zero-coupon bonds maturing at the date of each cash flow are called:

spot rates

When investors purchase, they pay the _____ price.

invoice

For the same time-to-maturity, a lower-coupon bond has a greater percentage price change than a higher-coupon bond when their market discount rate change by the same amount (the coupon effect)

True

A 10-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The price of this bond if the YTM increases by 25 basis points.

Enter your answer in dollars.

981.82

A 10-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The price of this bond if the YTM decreases by 25 basis points.

Enter your answer in dollars.

1,018.62

A 20-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The change in price of this bond if the YTM decreases by 50 basis points.

Enter your answer as a percentage.

5.98

A 25-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The change in price of this bond if the YTM decreases by 50 basis points.

Enter your answer as a percentage.

6.71

A 40-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The change in price of this bond if the YTM increases by 100 basis points.
Enter your answer as a percentage.

-13.33

A 40-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The change in price of this bond if the YTM decreases by 100 basis points.
Enter your answer as a percentage.

17.16

A 50-year bond has a coupon rate and YTM of 6% and pays interest annually.

Find:
The change in price of this bond if the YTM decreases by 125 basis points.
Enter your answer as a percentage.

23.73

A 50-year bond has a coupon rate and YTM of 8% and pays interest annually.

Find:
The change in price of this bond if the YTM decreases by 125 basis points.
Enter your answer as a percentage.

17.81

A stock has had returns of 10 percent, 20 percent, 30 percent, -5 percent, -10 percent, and -15 percent over the last six years. 

Find:
The geometric return for the stock.
Enter your answer as a percentage.

3.75

A 3-year bond with a 4% coupon rate paid annually.
Spot rates:
1-year        5%
2-year        6%
3-year        7%

Find:
The price of the bond.
Enter your answer in dollars.

922.64

A 3-year bond with a 4% coupon rate paid annually.
Spot rates:
1-year        5%
2-year        6%
3-year        7%

Find:
The YTM of the bond.
Enter your answer as a percentage.

6.94

A bond pays interest on January 13 and July 13.
A bond has traded and has a settlement date of March 30, 2026.

Find:
The number of days that have passed since the last coupon payment.
Enter your answer as the number of days.

77

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

 

Bond A:        4-year, 3% annual bond trading at 99                         

Bond B:        4-year, 5% annual bond trading at 104                       

Bond C:        8-year, 4% annual bond trading at 98                         

Bond D:        8-year, 5% annual bond trading at 101

 

Find:           

YTM of Bond A

Enter your answer as a percentage.

3.27

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
YTM of Bond B
Enter your answer as a percentage.

3.9

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
YTM of Bond C
Enter your answer as a percentage.

4.3

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
YTM of Bond D
Enter your answer as a percentage.

4.85

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
Average YTM of 4-year bonds
Enter your answer as a percentage.

3.59

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
Average YTM of 8-year bonds
Enter your answer as a percentage.

4.57

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
Estimated YTM of 7-year bond
Enter your answer as a percentage.

4.33

An analyst needs to assign a value to an illiquid 7-year, 4% annual coupon payment corporate bond. The analyst identifies four corporate bonds that have similar credit quality:

Bond A:     4-year, 3% annual bond trading at 99            
Bond B:     4-year, 5% annual bond trading at 104             
Bond C:     8-year, 4% annual bond trading at 98            
Bond D:     8-year, 5% annual bond trading at 101

Find:
Estimated Price of 7-year bond
Enter your answer in dollars.

980.63

A loan has a quoted rate of 10% and is compounded monthly.

Find:
Effective annual rate.
Enter your answer as a percentage.

10.47

A loan has an effective annual rate of 8% and is compounded quarterly.

Find:
Annual percentage rate.
Enter your answer as a percentage.

7.77

A five-year, 5% semiannual coupon payment government bond is priced at 99 per 100 of par value. 

Find:
Calculate the annual yield-to-maturity stated on a semiannual bond basis.
Enter your answer as a percentage.

5.23

A five-year, 5% semiannual coupon payment government bond is priced at 99 per 100 of par value. 

Find:
Calculate the annual yield-to-maturity stated on a semiannual bond basis.
Convert that annual yield to an annual rate that can be used for direct comparison with otherwise comparable bonds that make quarterly coupon payments
Enter your answer as a percentage.

5.2

A 6-year 4% annual bond has a YTM of 5%. 

Find:
Current yield.
Enter your answer as a percentage.

4.21

A 4-year 6% annual bond has a YTM of 5%. 

Find:
Current yield.
Enter your answer as a percentage.

5.79

A 12-year 6% annual paying bond quoted at 103 has the following call schedule:
Callable in Year 4 @ 102
Callable in Year 8 @ 101
Redeemed at par in Year 12

Find:
Yield-to-worst.
Enter your answer as a percentage.

5.6

Suppose that a 91-day US Treasury bill (T-bill) with a face value of $100,000 is quoted at a

discount rate of 2.50% for an assumed 360-day year.

Find:            Price

Enter your answer in dollars.

99,368.06

Bond with semiannual coupon payments and a 3% coupon rate.
Two months have passed since the last interest payment.

Find:
Accrued interest.
Use monthly accrued interest calculations. 
Enter your answer in dollars

5.00

Bond with a coupon rate of 6 percent and a clean price of $950.
The next semiannual coupon payment is due in 2 months.

Find:
Invoice price.
Use monthly accrued interest calculations. 
enter your answer in dollars

970

A 6% corporate bond with a YTM of 5.5% is priced for settlement on October 24, 2025. 
The bond makes semiannual coupon payments on February 15 and August 15 of each year and matures on August 15, 2035. 
The corporate bond uses the 30/360 day-count convention for accrued interest.

Find:
The price of the bond at the last coupon date.
Enter your answer in dollars.

1,038.07

A 6% corporate bond with a YTM of 5.5% is priced for settlement on October 24, 2025. 
The bond makes semiannual coupon payments on February 15 and August 15 of each year and matures on August 15, 2035. 
The corporate bond uses the 30/360 day-count convention for accrued interest.

Find:
The number of days that have passed since the last coupon payment.

69

A 6% corporate bond with a YTM of 5.5% is priced for settlement on October 24, 2025. 
The bond makes semiannual coupon payments on February 15 and August 15 of each year and matures on August 15, 2035. 
The corporate bond uses the 30/360 day-count convention for accrued interest.

Find:
The full price of the bond on the settlement date.
Enter your answer in dollars.

1,048.92

A 6% corporate bond with a YTM of 5.5% is priced for settlement on October 24, 2025. 
The bond makes semiannual coupon payments on February 15 and August 15 of each year and matures on August 15, 2035. 
The corporate bond uses the 30/360 day-count convention for accrued interest.

Find:
The amount of interest that has accrued from the last coupon date to the settlement date.
Enter your answer in dollars.

11.5

A 6% corporate bond with a YTM of 5.5% is priced for settlement on October 24, 2025.. 
The bond makes semiannual coupon payments on February 15 and August 15 of each year and matures on August 15, 2035. 
The corporate bond uses the 30/360 day-count convention for accrued interest.

Find:
The flat price of the bond on the settlement date.
Enter your answer in dollars.

1,037.42