BA 323 EXAM 2 2026 BUSINESS INTELLIGENCE
TOOLS DRILL PACK ANSWER SHEET
◉ 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.
◉ what is a coupon payment?
Answer: a fixed amount of interest that is paid annually or
semiannually by the issuer to its bondholders.
◉ 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.
◉ when interest rates in the market rise, we can expect the price of
bonds to (increase/decrease)
,Answer: decrease
◉ 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
◉ how do you calculate a bond's current yield?
Answer: Current yield = Annual coupon payment/Price
◉ 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.
◉ what is the difference between interest and dividends?
Answer: interest is tax deductible, dividends are not
◉ 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
, ◉ 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.
◉ what are protective covenants?
Answer: a part of the indenture limiting certain actions during the
term of the loan
◉ It is the duty of the bond ____ to manage the sinking fund so that
bonds can be repaid.
Answer: trustee
◉ 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
◉ what is usually included in a bond's indenture?
Answer: -the total amount of bonds issued
-the repayment arrangements
◉ What is the purpose of a sinking fund?
TOOLS DRILL PACK ANSWER SHEET
◉ 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.
◉ what is a coupon payment?
Answer: a fixed amount of interest that is paid annually or
semiannually by the issuer to its bondholders.
◉ 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.
◉ when interest rates in the market rise, we can expect the price of
bonds to (increase/decrease)
,Answer: decrease
◉ 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
◉ how do you calculate a bond's current yield?
Answer: Current yield = Annual coupon payment/Price
◉ 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.
◉ what is the difference between interest and dividends?
Answer: interest is tax deductible, dividends are not
◉ 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
, ◉ 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.
◉ what are protective covenants?
Answer: a part of the indenture limiting certain actions during the
term of the loan
◉ It is the duty of the bond ____ to manage the sinking fund so that
bonds can be repaid.
Answer: trustee
◉ 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
◉ what is usually included in a bond's indenture?
Answer: -the total amount of bonds issued
-the repayment arrangements
◉ What is the purpose of a sinking fund?
