MBA 702 - EXAM 2 - BOND VALUATION - DR. SUNG IK KIM
COMPREHENSIVE EXAM QUESTIONS WITH DETAILED
VERIFIED AND 100% ACCURATE ANSWERS BRAND NEW
EXAM ALREADY GRADED (A+ PASS)
If a firm raises capital by selling new bonds, it could be callable to the
"bond holders," and the coupon rate is generally set equal to the required
rate on bonds of equal risk.
True
False Ans✓✓✓False. It could be callable the "issuing firm". The second
part "the coupon rate is generally set equal to the required rate on bonds
of equal risk." is true.
A call provision gives bondholders the right to demand, or "call for,"
repayment of a bond. Typically, companies call bonds if interest rates
rise and do not call them if interest rates decline.
True
False Ans✓✓✓False. A call provision gives the bond issuer the right to
demand repayment of a bond. Typically, firms (bond issuers) call bonds
if interest rates decline.
The price sensitivity of a bond to a given change in interest rates is
generally greater the longer the bond's remaining maturity.
True
False Ans✓✓✓True. Refer to p. 26 - 30 on the lecture slide.
The time to maturity does not affect the change in the value of a bond in
response to a given change in interest rates.
, True
False Ans✓✓✓False. The bonds with longer time to maturity are more
sensitive to interest rate changes.
The shorter the time to maturity, the greater the change in the value of a
bond in response to a given change in interest rates, other things held
constant.
True
False Ans✓✓✓False. The shorter the time to maturity, the smaller the
change in the value of a bond in response to a given change in interest
rates, other things held constant.
The market value of any real or financial asset, including stocks, bonds,
or art work purchased in hope of selling it at a profit, may be estimated
by determining future cash flows and then discounting them back to the
present.
True
False Ans✓✓✓True. The price of any financial assets is the present
value of all future cash flows that the assets expect to create.
A bond that had a 20-year original maturity with 1 year left to maturity
has more price risk than a 10-year original maturity bond with 1 year left
to maturity. (Assume that the bonds have equal default risk and equal
coupon rates, and they cannot be called.)
True
COMPREHENSIVE EXAM QUESTIONS WITH DETAILED
VERIFIED AND 100% ACCURATE ANSWERS BRAND NEW
EXAM ALREADY GRADED (A+ PASS)
If a firm raises capital by selling new bonds, it could be callable to the
"bond holders," and the coupon rate is generally set equal to the required
rate on bonds of equal risk.
True
False Ans✓✓✓False. It could be callable the "issuing firm". The second
part "the coupon rate is generally set equal to the required rate on bonds
of equal risk." is true.
A call provision gives bondholders the right to demand, or "call for,"
repayment of a bond. Typically, companies call bonds if interest rates
rise and do not call them if interest rates decline.
True
False Ans✓✓✓False. A call provision gives the bond issuer the right to
demand repayment of a bond. Typically, firms (bond issuers) call bonds
if interest rates decline.
The price sensitivity of a bond to a given change in interest rates is
generally greater the longer the bond's remaining maturity.
True
False Ans✓✓✓True. Refer to p. 26 - 30 on the lecture slide.
The time to maturity does not affect the change in the value of a bond in
response to a given change in interest rates.
, True
False Ans✓✓✓False. The bonds with longer time to maturity are more
sensitive to interest rate changes.
The shorter the time to maturity, the greater the change in the value of a
bond in response to a given change in interest rates, other things held
constant.
True
False Ans✓✓✓False. The shorter the time to maturity, the smaller the
change in the value of a bond in response to a given change in interest
rates, other things held constant.
The market value of any real or financial asset, including stocks, bonds,
or art work purchased in hope of selling it at a profit, may be estimated
by determining future cash flows and then discounting them back to the
present.
True
False Ans✓✓✓True. The price of any financial assets is the present
value of all future cash flows that the assets expect to create.
A bond that had a 20-year original maturity with 1 year left to maturity
has more price risk than a 10-year original maturity bond with 1 year left
to maturity. (Assume that the bonds have equal default risk and equal
coupon rates, and they cannot be called.)
True
