3/28/23, 10:51 AM Bond Valuation

NAME : 
CLASS : 
Bond Valuation
20 Questions DATE  : 

1. Long-term bonds are ... than short-term bonds.

A less sensitive to interest rate changes B subject to more uncertainty

C less risky D more liquid

2. If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.

A False B True

3. As a bond approaches its maturity date, its price necessarily approaches par value.

A True B False

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4. Which of the following statements is FALSE regarding bonds?

If the par value is lower than the market

A Both A and B are false. B price, then the yield-to-maturity must be
lower than the coupon rate.

If the market price is lower than the par

C None of the above are false. D value, then the coupon rate must be
lower than the yield-to-maturity.

5. When the price of bond is calculated below its par value, it is classified as...

A consideration earnings B classified bond

C compound bond D discount bond

6. What is a bond?

A binding security B an agreement or friendship

a type of debt a company issues to something that binds, fastens, confines,

C D
investors or holds together

7. When you purchase a municipal bond, you are:

A buying a portion of a municipality B diversifying your portfolio

C loaning money to a municipality D investing in an index fund

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8. A bond issued by a corporation is called a ________ .

A stock option B corporate bond

C market share D share of stock

9. The rate of interest on a bond is called the ________ .

A coupon rate B discount rate

C bond rate D interest rate

10. 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.

A Over $1,200 B Under $1,000

C Not enough information to tell D Equal $1,000

11. A bond which has a yield to maturity greater than its coupon rate will sell for a price

A at par B above par

equal to face value of bond plus the

C D below par
interest payments

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3/28/23, 10:51 AM Bond Valuation

12. What is the value of zero coupon bond sold @ 800 maturity 7 years form now discount
rate 14%

A 5600 B 1000

C 399 D 450

13. What will the straight value of a bond with a coupon rate of 8%, and a market rate of

A at par (or face value) B at a premium

C at a discount D not enough information

14. What is a coupon?

something you use in a supermarket to

A B an asset bought in the stock market
decrease your cost

the interest rate on a bond at the time it used in the stock market to lessen the
C D
is issued initial cost of stocks

15. If a coupon rate is 10%, how much would a semi-annual coupon payment be?

A $1000 B $50

C $25 D $100

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16. If a bond was issued with a 5% coupon rate and the market rate is now 8%, the coupon
payment:

A Goes down B Goes up

C Stays the same D Coupon for what?

17. A bond which has a yield to maturity greater than its coupon rate will sell for a price

A above par B below par

equal to face value of bond plus the

C at par D
interest payments

18. What will happen to the market value of a bond if interest rates rise?

A No idea B market value will decrease

C Stay the same D market value will increase

19. A bond which has a yield to maturity greater than its coupon rate will sell for a price

equal to face value of bond plus the

A B above par
interest payments

C at par D below par

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20. What is usually the relationship between a bond's rating and the interest rate a

A Higher ratings mean lower interest B there is no relationship

C higher ratings mean higher interest D the rating is the same as the rate

Answer Key

1.b 2.a 3.a 4.c

5.d 6.c 7.c 8.b

9.a 10.a 11.d 12.c

13.a 14.c 15.b 16.c

17.b 18.b 19.d 20.a

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