Page |1
Fin 3400 Questions and Correct Answers/
Latest Update / Already Graded
T/F A fairly priced bond with a coupon less than the expected return
must sell at a discount from par
Ans: True
T/F Suppose two bonds of equivalent risk and maturity have different
prices such that one is a premium bond and one is a discount bond. The
premium bond must have a greater expected return than the discount
bond.
Ans: False
T/F Any security that returns a greater percentage of the price sooner
is less price-volatile
Ans: True
T/F The higher a bond's coupon, the lower the bond's price volatility.
Ans: True
T/F . Higher interest rates lead to lower bond convexity, ceteris paribus.
All rights reserved © 2025/ 2026 |
, Page |2
Ans: True
Which of the following bond terms are generally positively related to
bond price volatility?
I. Coupon rate
II. Maturity
III. YTM
IV. Payment frequency
Ans: ll only
T/F For a given interest rate change, a 20-year bond's price change will
be twice that of a 10-year bond's price change.
Ans: False
A security has an expected return less than its required return. This
security is
A.
selling at a premium to par.
B.
All rights reserved © 2025/ 2026 |
, Page |3
selling at a discount to par.
C.
selling for more than its PV.
D.
selling for less than its PV.
E.
a zero coupon bond
Ans: C
You would want to purchase a security if current market price
____________ fair present value or expected rate of return
____________ required rate of return.
A.
≥; ≤
B.
≥; ≥
All rights reserved © 2025/ 2026 |
Fin 3400 Questions and Correct Answers/
Latest Update / Already Graded
T/F A fairly priced bond with a coupon less than the expected return
must sell at a discount from par
Ans: True
T/F Suppose two bonds of equivalent risk and maturity have different
prices such that one is a premium bond and one is a discount bond. The
premium bond must have a greater expected return than the discount
bond.
Ans: False
T/F Any security that returns a greater percentage of the price sooner
is less price-volatile
Ans: True
T/F The higher a bond's coupon, the lower the bond's price volatility.
Ans: True
T/F . Higher interest rates lead to lower bond convexity, ceteris paribus.
All rights reserved © 2025/ 2026 |
, Page |2
Ans: True
Which of the following bond terms are generally positively related to
bond price volatility?
I. Coupon rate
II. Maturity
III. YTM
IV. Payment frequency
Ans: ll only
T/F For a given interest rate change, a 20-year bond's price change will
be twice that of a 10-year bond's price change.
Ans: False
A security has an expected return less than its required return. This
security is
A.
selling at a premium to par.
B.
All rights reserved © 2025/ 2026 |
, Page |3
selling at a discount to par.
C.
selling for more than its PV.
D.
selling for less than its PV.
E.
a zero coupon bond
Ans: C
You would want to purchase a security if current market price
____________ fair present value or expected rate of return
____________ required rate of return.
A.
≥; ≤
B.
≥; ≥
All rights reserved © 2025/ 2026 |
