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.
6.3%
B.
7%
C.
13%
D.
6.8%
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.
7.5%
B.
6%
C.
7%
D.
6.5%
Question #4
Corporate debt depends on the value and the risk of the firm's ______.
A.
cash
B.
assets
C.
equity
D.
liabilities
Question #5
The __________ on government bonds provide a benchmark for all interest rates.
A.
collateral
B.
cost of capital
C.
interest rates
D.
inflation rates
Question #6
Which of the following are not plain vanilla bonds?
A.
floating-rate bonds, coupon bonds, zero-coupon bonds
B.
floating-rate bonds, convertible bonds, zero-coupon bonds
C.
coupon bonds, convertible 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.
short-term cash flows
B.
current cash flows
C.
distant cash flows
Question #8
Because the _____ rate is uncertain, so is the _______ rate of interest offered on bonds.
A.
inflation, nominal
B.
real, inflation
C.
nominal, inflation
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.
5%
C.
12%
D.
10%
Question #10
Which of the following sell bonds?
A.
U.S. Treasury, corporations, state and local governments
B.
U.S. Treasury, individuals and households
C.
U.S. Treasury, individuals and households state and local governments
D.
U.S. Treasury, corporations, individuals and households
Question #11
What is the term used in finance to represent simple, standard, and common?
A.
plain vanilla
B.
transparent
C.
easy to understand
D.
evident
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