FIN 335 UNCW Exam 2 – Study Guide, Practice Questions & Exam
Review
CH 6
The stated interest payment, in dollars, made on a bond each period is called the bond's: -
✔✔Coupon
CH 6
The principal amount of a bond that is repaid at the end of the loan term is called the bond's: -
✔✔Face Value
CH 6
The rate of return required by investors in the market for owning a bond is called the: -
✔✔Yield to maturity
CH 6
The annual coupon of a bond divided by its face value is called the bond's: - ✔✔Coupon rate
CH 6
A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a: -
✔✔Discount bond
CH 6
A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a: -
✔✔Premium bond
CH 6
, Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per
year and a face value of $1000. If the yield to maturity on similar bonds is 8%, this bond should:
A) Sell for the same price as the similar bond regardless of their respective maturities.
B) Sell at a premium.
C) Sell at a discount.
D) Sell for either a premium or a discount but it's impossible to tell which.
E) Sell for par value. - ✔✔B. Sell at premium
CH 6
Dizzy Corp. bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years
remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity?
A) 12.00%
B) 13.99%
C) 14.54%
D) 15.25%
E) 15.57% - ✔✔C.
Response: $940 = 1000 FV, 60 PMT, 6 N, -940 PV, CPT I/Y = 7.27%;
YTM = 7.27% x 2 = 14.54%
Semiannually = 6 months
CH 6
D&G Enterprises issues bonds with a $1,000 face value that make coupon payments of $30
every 3 months. What is the coupon rate?
A) 0.30%
B) 3.00%
C) 9.00%
D) 12.00%
Review
CH 6
The stated interest payment, in dollars, made on a bond each period is called the bond's: -
✔✔Coupon
CH 6
The principal amount of a bond that is repaid at the end of the loan term is called the bond's: -
✔✔Face Value
CH 6
The rate of return required by investors in the market for owning a bond is called the: -
✔✔Yield to maturity
CH 6
The annual coupon of a bond divided by its face value is called the bond's: - ✔✔Coupon rate
CH 6
A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a: -
✔✔Discount bond
CH 6
A bond with a face value of $1,000 that sells for more than $1,000 in the market is called a: -
✔✔Premium bond
CH 6
, Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per
year and a face value of $1000. If the yield to maturity on similar bonds is 8%, this bond should:
A) Sell for the same price as the similar bond regardless of their respective maturities.
B) Sell at a premium.
C) Sell at a discount.
D) Sell for either a premium or a discount but it's impossible to tell which.
E) Sell for par value. - ✔✔B. Sell at premium
CH 6
Dizzy Corp. bonds bearing a coupon rate of 12%, pay coupons semiannually, have 3 years
remaining to maturity, and are currently priced at $940 per bond. What is the yield to maturity?
A) 12.00%
B) 13.99%
C) 14.54%
D) 15.25%
E) 15.57% - ✔✔C.
Response: $940 = 1000 FV, 60 PMT, 6 N, -940 PV, CPT I/Y = 7.27%;
YTM = 7.27% x 2 = 14.54%
Semiannually = 6 months
CH 6
D&G Enterprises issues bonds with a $1,000 face value that make coupon payments of $30
every 3 months. What is the coupon rate?
A) 0.30%
B) 3.00%
C) 9.00%
D) 12.00%
