FINC 301 Chapter 8 Study Guide Test.

FINC 301 Chapter 8 Study Guide Test. Which of the following statements is true? a. The largest investors in corporate bonds are institutional investors such as life insurance companies and pension funds. b. The market for corporate bonds is thin compared to the market for corporate stocks. c. Prices in the corporate bond market tend to be more volatile than prices of securities sold in markets with greater trading volumes. d. All of the above are true - CORRECT ANSWER d. All of the above are true In calculating the current price of a bond paying semiannual coupons, one needs to a. use double the number of years for the number of payments made b. use the semiannual coupon c. use the semiannual rate as the discount rate d. all of the above need to be done - CORRECT ANSWER d. all of the above need to be done Which one of the following statements about vanilla bonds is NOT true? a. They have fixed coupon payments b. The face value, or par value, for most corporate bonds is $1,000 c. Coupon payments are usually made quarterly d. The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value - CORRECT ANSWER c. Coupon payments are usually made quarterly If the yield curve has a positive slope: a. interest rates are expected to be lower in the future b. interest rates are expected to be higher in the future c. interest rates are expected to be unchanged in the future d. interest rates are expected to be more volatile in the future - CORRECT ANSWER b. interest rates are expected to be higher in the future If John buys a 5-year bond with a 9% coupon rate paid semiannually and $1000 par value for $925, his yield to maturity would be closest to: Round to two decimal places. a. 9.65% b. 5.49% c. 8.5% d. 10.99% - CORRECT ANSWER d. 10.99%