QUESTION 1
Using annual compounding, what is the present value of a $39,703 sum to be received in 16 years when a 9% rate of return can be earned on investment?
$9,406.
$10,000.
$5,000.
$157,633. 12.5 points QUESTION 2
settlement 1/17/2014 maturity 1/13/2034 rate 8% price $90 redemption $100 frequency 2 Based on the above information what is the bond’s yield to maturity?
7.78%
15.2%
8%
9.8%
12.5 points QUESTION 3
A coupon bond which pays interest annually, has a par value of $1,000, matures in 5 years and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be __________.
$855.55
$891.45
$926.00
$1,000.00 12.5 points QUESTION 4
Base your answer on yearly data from the following series that is available from Board of Governors of the Federal Reserve Website via the DDP Program. 10-year Treasury constant maturity (H15/H15/RIFLGFCY10_N.M) Moody’s Aaa (H15/H15/RIMLPAAAR_N.M) Moody’s Baa (H15/H15/RIMLPBAAR_N.M)
In October of 2001 investors demanded a larger yield premium to hold corporate bonds rated Baa by Moody’s relative to the ten year treasury than in June of 2006.
True False 12.5 points QUESTION 5
The present value of a future sum will rise with a fall in the:
interest rate.
investment period.
future sum.
none of these. 12.5 points QUESTION 6
settlement 1/13/2014 maturity 1/13/2034 rate 8% price $120 redemption $100 frequency 2 Based on the above information what is the bond’s yield to maturity?
8.2%
5.64%
6.23%
8%
12.5 points QUESTION 7
A BB rated corporate bond with a four years left to maturity will always have a higher yield to maturity than a U.S. Treasury bond that has four years left to maturity.
True False 12.5 points QUESTION 8
Bonds with lower ratings but the same maturities have higher yields (yield to maturity). This is confirmed by FINRA data. True False
