1.

a ____ is a complex and lengthy legal document stating the conditions under
which a bond has been issued. BOND INDENTURE
2. the value of a bond is the present value of the INTEREST PAYMENT AND
MATURIRTY VALUE.
3. If the required return is less than the coupon rate, a bond will set at PAR
4. When valuing a bond, the characteristics of the bond that remain fixed are all
of the following EXCEPT the PRICE
5. You intend to purchase a 10-year, php 1,000 face value bond that pays
interest of php60 every 6 months. If you nominal annual required rate of
return is 10 percent with semiannual compounding, how much should you be
willing to pay for this bond? 1,124,62
6. Bonds are LONG TERM DEBT INSTRUMENTS
7. Assume that you are considering the purchase of a php1,000 par value bond
that pays interest of php70 each six months and has 10 years to go before it
matures. If you buy this bond, you expect to hold it for 5 years and then sell It
in the market. You (and other investors) currently require a nominal annual
rate of 16 percent, but you expect the market to require a nominal rate of
only 12 percent when you sell the bond due to a general decline in interest
rates. How much should you be willing to pay for this bond? PHP 1,115.81
8. Assume that you wish to purchase a 20-year bond that has a maturity value
of PHP 1,000 and makes semiannual interest payments of PHP40. If you
require a 10 percent nominal yield to maturity on this investment, what is the
maximum price you should be willing to pay for the bond? PHP 828
9. Generally, an increase in risk will result in A HIGHER required return or
interest rate.
10. The key inputs to the valuation process include RETURNS, TIMING AND
RISK
11.A 10-year treasury bond has an 8 percent coupon. An 8-year treasury bond
has a 10 percent coupon. Both bonds have the same yield to maturity. If the
yields to maturity of bonds increase by the same amount, which of the
following statements is most correct? BOTH BONDS WILL DECLINE IN
PRIC, BUT THE 10-YEAR BOND WILL HAVE A GREATER PERCENTAGE
DECLINE IN PRICE THAN THE 8-YEAR BOND.
12. Cold Boxes Ltd. Has 100 bonds outstanding (maturity value=php1,000). The
nominal required rate of return on these bonds is currently 10 percent, and
interest is paid semiannually. The bonds mature in 5 years, and their current
market value is php768 per bond. What is the annual coupon interest rate?
8%
13.A PHP1,000 par value bond pays interest of PHP35 each quarter and will
mature in 10 years. If your nominal annual required rate of return is 12
percent with quarterly compounding, how much should you be willing to pay
for this bond? PHP 1,115,57
14.THE PRESENT VALUE of all future cash flows an asset is expected to provide
over a relevant time period is the value of the asset.

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 15. Your client has been offered a 5-year, php1,000 par value bond with a 10
percent coupon. Interest on this bond is paid quarterly. If your client is to earn
a nominal rate of return of 12 percent, compounded quarterly, how much
should she pay for the bond? Php 926
16.Which of the following statements is most correct? IF A BOND IS SELLING
AT PAR VALUE, ITS CURRENT YIELD EQUALS ITS YIELD TO MATURITY.
17.A 15-year bond with a face value of php1,000 currently sells for Php 850.
Which of the following statements is most correct? The bond’s current
yield is equal to bond’s coupon rate.
18. Assume that you wish to purchase a bond with a 30-year maturity, an annual
coupon rate of 10 percent, a face value of php 1,000, and semiannual interest
payments. If you require a 9 percent nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay for the
bond? Php 1,102.74
19.If a bond pays 1,000 plus interest at maturity, php 1,000 is called the PAR
VALUE
20.The current price of a 10-year, php1,000 par value bond is PHP 1,158.9.
Interest on this bond is paid every six months, and the nominal annual yield
is 14 percent. Given these facts, what is the annual coupon rate on this bond?
17%
21.The REAL rate of interest creates equilibrium between the supply of savings
and the demand for investment funds.
22.The price of a bond with a fixed coupon rate and the market required return
have a relationship that is best described as CONSTANT
23.The NOMINAL rate of interest is the actual rate charged by the supplier and
paid by the demander of funds.
24.The PAR value of a bond is also called its face value. Bonds which sell at less
than face value are priced at a DISCOUNT, while bond which sell at greater
than face value sell at a PREMIUM.
25.When the required return is constant and equal rate, the price of a bond as it
approached its maturity date will REMAIN CONSTANT.
26.The ABC company has two bonds outstanding that are the same except for
the maturity date. Bond D matures in 4 years, while Bond E matures in 7
years. If the required return changes by 15 percent. BOND E WILL HAVE
GREATER CHANGE IN PRICE
27.The legal contract setting forth the terms and provisions of a corporate bond
is an INDENTURE
28.A bond has an annual 8 percent coupon rate, a maturity of 10 years, a face
value of PHP 1,000 and makes semiannual payments. If the price is PHP
934.96, what is the annual nominal yield to maturity on the bond? 9%
29.A 10-year corporate bond has an annual coupon payment of 9 percent. The
bond currently selling at par PHP1,000. Which of the following statements is
most correct? AL OF THE STATEMENTS ABOVE ARE CORRECT.

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 30. Consider a PHP 1,000 par value bond with a 7 percent annual coupon. The
bond pays interest annually. There are 9 years remaining until maturity. What
is the current yield on the bond assuming that the required return on the
bond is 10 percent? 8.46%

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