BA 323 Exam 2 Business Intelligence TOOLS
DRILL Sheet Questions and Answers Verified
Solutions Latest Update 2026/2027
Question:
a corporate bond's yield to maturity is
a) remains fixed over the life of the bond
b) changes over time
c) is always equal to a bond's coupon rate
d) remains fixed over the life of the bond
e) is usually not the same as a bond's coupon rate.
Answer:
changes over time, is usually not the same as a bond's coupon rate.
Question:
what is a coupon payment?
Answer:
a fixed amount of interest that is paid annually or semiannually by the issuer to its bondholders.
Question:
as an investor in the bond market, why should you be concerned about changes in interest rates?
Answer:
changes in interest rates cause changes in bond prices.
Question:
when interest rates in the market rise, we can expect the price of bonds to (increase/decrease)
Answer:
decrease
,Question:
the sensitivity of a bond's price to interest rate changes is dependent on which of the following two
variables?
Answer:
1) coupon rate
2) time to maturity
Question:
how do you calculate a bond's current yield?
Answer:
Current yield = Annual coupon payment/Price
Question:
define corporate bond's yield to maturity (YTM).
Answer:
YTM is the prevailing market interest rate for bonds with similar features. YTM is also the
expected return for an investor who buys the bond today and holds it to maturity.
Question:
what is the difference between interest and dividends?
Answer:
interest is tax deductible, dividends are not
Question:
To find the total bond value, add the present value of the amount paid at maturity to the ______ of
the annual coupon payments.
Answer:
annuity present value
, Question:
If you are holding two identical bonds, except that one matures in 10 years and the other matures in
5 years, which bond's price will be more sensitive to interest rate risk?
Answer:
The 10-year bond. The longer the term, the greater the interest rate sensitivity.
Question:
what are protective covenants?
Answer:
a part of the indenture limiting certain actions during the term of the loan
Question:
It is the duty of the bond ____ to manage the sinking fund so that bonds can be repaid.
Answer:
trustee
Question:
If a bond is issued with a call provision, it allows the issuer to ______ part or all of the bond at
defined prices and times.
Answer:
repurchase
Question:
what is usually included in a bond's indenture?
Answer:
-the total amount of bonds issued
-the repayment arrangements
DRILL Sheet Questions and Answers Verified
Solutions Latest Update 2026/2027
Question:
a corporate bond's yield to maturity is
a) remains fixed over the life of the bond
b) changes over time
c) is always equal to a bond's coupon rate
d) remains fixed over the life of the bond
e) is usually not the same as a bond's coupon rate.
Answer:
changes over time, is usually not the same as a bond's coupon rate.
Question:
what is a coupon payment?
Answer:
a fixed amount of interest that is paid annually or semiannually by the issuer to its bondholders.
Question:
as an investor in the bond market, why should you be concerned about changes in interest rates?
Answer:
changes in interest rates cause changes in bond prices.
Question:
when interest rates in the market rise, we can expect the price of bonds to (increase/decrease)
Answer:
decrease
,Question:
the sensitivity of a bond's price to interest rate changes is dependent on which of the following two
variables?
Answer:
1) coupon rate
2) time to maturity
Question:
how do you calculate a bond's current yield?
Answer:
Current yield = Annual coupon payment/Price
Question:
define corporate bond's yield to maturity (YTM).
Answer:
YTM is the prevailing market interest rate for bonds with similar features. YTM is also the
expected return for an investor who buys the bond today and holds it to maturity.
Question:
what is the difference between interest and dividends?
Answer:
interest is tax deductible, dividends are not
Question:
To find the total bond value, add the present value of the amount paid at maturity to the ______ of
the annual coupon payments.
Answer:
annuity present value
, Question:
If you are holding two identical bonds, except that one matures in 10 years and the other matures in
5 years, which bond's price will be more sensitive to interest rate risk?
Answer:
The 10-year bond. The longer the term, the greater the interest rate sensitivity.
Question:
what are protective covenants?
Answer:
a part of the indenture limiting certain actions during the term of the loan
Question:
It is the duty of the bond ____ to manage the sinking fund so that bonds can be repaid.
Answer:
trustee
Question:
If a bond is issued with a call provision, it allows the issuer to ______ part or all of the bond at
defined prices and times.
Answer:
repurchase
Question:
what is usually included in a bond's indenture?
Answer:
-the total amount of bonds issued
-the repayment arrangements
