Finance 571 - Corporate Finance » Spring 2022 » Wk 1 Practice Ch. 6, Valuing Bonds
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Question #1
When interest rates rise, bond prices ______.
A.
fall
B.
stay the same
C.
rise
Question #2
If the nominal rate of interest is 10% and the rate of inflation is 3%, the real interest rate is ____.
A.
6.8%
B.
6.3%
C.
13%
D.
7%
Question #3
Mortor's Corporation sold 6 year bonds for $1,072.62, with a face value of $1,000 and a coupon rate of 8%. The annual yield to maturity is ______.
A.
6%
B.
6.5%
C.
7.5%
D.
7%
Question #4
Corporate debt depends on the value and the risk of the firm's ______.
A.
assets
B.
liabilities
C.
equity
D.
cash
Question #5
The __________ on government bonds provide a benchmark for all interest rates.
A.
interest rates
B.
cost of capital
C.
inflation rates
D.
collateral
Question #6
Which of the following are not plain vanilla bonds?
A.
coupon bonds, convertible bonds, zero-coupon bonds
B.
floating-rate bonds, convertible bonds, zero-coupon bonds
C.
floating-rate bonds, coupon bonds, zero-coupon bonds
D.
floating-rate bonds, convertible bonds, coupon bonds
Question #7
A change in interest rate has the greatest effect on the present value of ______.
A.
current cash flows
B.
short-term cash flows
C.
distant cash flows
Question #8
Because the _____ rate is uncertain, so is the _______ rate of interest offered on bonds.
A.
nominal, inflation
B.
real, inflation
C.
inflation, nominal
D.
inflation, real
Question #9
Marley Corporation's bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 5%. If the price of the bond is $841.51, the yield to maturity is _____. (Use trial and error to calculate yield)
A.
8%
B.
10%
C.
12%
D.
5%
Question #10
Which of the following sell bonds?
A.
U.S. Treasury, individuals and households
B.
U.S. Treasury, corporations, individuals and households
C.
U.S. Treasury, individuals and households state and local governments
D.
U.S. Treasury, corporations, state and local governments
Question #11
What is the term used in finance to represent simple, standard, and common?
A.
easy to understand
B.
plain vanilla
C.
transparent
D.
evident
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