FINANCE 301 Final Exam Rated A+ | Questions
all with 100% Correct Answers
Is the yield to maturity on a bond the same thing as the required return? Is YTM the
same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par.
Two years from now, the required return on the same bond is 8 percent.
What is the coupon rate on the bond?
What is the YTM on the bond? - ANSWER Coupon Rate: 10%
YTM: 8%
Suppose you buy a 7 percent coupon, 20-year bond today when it's first issued. If
interest rates suddenly rise to 15 percent, what happens to the value of your bond?
The price of the bond will fall.
The price of the bond will rise. - ANSWER The price of the bond will fall
The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in
eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the
yield to maturity?
6.97 percent
6.92 percent
6.88 percent
7.22 percent - ANSWER 7.22
, Oil Wells offers 5.65 percent coupon bonds with semiannual payments and a yield to
maturity of 6.94 percent. The bonds mature in seven years. What is the market price per
bond if the face value is $1,000?
$949.70
$929.42
$936.48
$902.60
$913.48 - ANSWER 929.42
World Travel has 7 percent, semiannual, coupon bonds outstanding with a current
market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent.
How many years is it until these bonds mature?
12.26 years
12.53 years
18.49 years
24.37 years
25.05 years - ANSWER 12.53 years
How much are you willing to pay for one share of LBM stock if the company just paid an
annual dividend of $2.24, the dividends increase by 2.3 percent annually, and you
require a return of 14.8 percent?
$19.29
$19.33
$18.33
$18.21
all with 100% Correct Answers
Is the yield to maturity on a bond the same thing as the required return? Is YTM the
same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par.
Two years from now, the required return on the same bond is 8 percent.
What is the coupon rate on the bond?
What is the YTM on the bond? - ANSWER Coupon Rate: 10%
YTM: 8%
Suppose you buy a 7 percent coupon, 20-year bond today when it's first issued. If
interest rates suddenly rise to 15 percent, what happens to the value of your bond?
The price of the bond will fall.
The price of the bond will rise. - ANSWER The price of the bond will fall
The 7 percent bonds issued by Modern Kitchens pay interest semiannually, mature in
eight years, and have a $1,000 face value. Currently, the bonds sell for $987. What is the
yield to maturity?
6.97 percent
6.92 percent
6.88 percent
7.22 percent - ANSWER 7.22
, Oil Wells offers 5.65 percent coupon bonds with semiannual payments and a yield to
maturity of 6.94 percent. The bonds mature in seven years. What is the market price per
bond if the face value is $1,000?
$949.70
$929.42
$936.48
$902.60
$913.48 - ANSWER 929.42
World Travel has 7 percent, semiannual, coupon bonds outstanding with a current
market price of $1,023.46, a par value of $1,000, and a yield to maturity of 6.72 percent.
How many years is it until these bonds mature?
12.26 years
12.53 years
18.49 years
24.37 years
25.05 years - ANSWER 12.53 years
How much are you willing to pay for one share of LBM stock if the company just paid an
annual dividend of $2.24, the dividends increase by 2.3 percent annually, and you
require a return of 14.8 percent?
$19.29
$19.33
$18.33
$18.21
