FINC311 Exam 4 | exam review 2024
What condition must exist if a bond's coupon rate is to equal both the bond's
current yield and its yield to maturity? Assume the market rate of interest for this
bond is positive ** Answ** The bond must be priced at par.
The market-required rate of return on a bond that is held for its entire life is called
the: ** Answ** yield to maturity.
Which one of the following terms applies to a bond that initially sells at a deep
discount and only makes one payment to bondholders? ** Answ** Zero
coupon
The rate of return an investor earns on a bond prior to adjusting for inflation is
called the: ** Answ** nominal rate
Bond ratings classify bonds based on: ** Answ** default risk only.
When a bond's yield to maturity is less than the bond's coupon rate, the bond: **
Answ** is selling at a premium.
Which one of the following bonds is most apt to have the smallest liquidity
premium? Treasure Bill, Corporate bond issued by a new firm, Municipal bond
issued by the state of NY, Municipal bond issued by rural city in Alaska, or
Corporate bond issued by General Motors? ** Answ** treasury bill
, The Treasury yield curve plots the yields on Treasury notes and bonds relative to
the ____ of those securities. ** Answ** maturity
Which one of the following statements is true? ** Answ** A discount bond
has a coupon rate that is less than the bond's yield to maturity.
The current yield on a bond is equal to the annual interest divided by the **
Answ** current market price
A real rate of return is defined as a rate that has been adjusted for which one of the
following? ** Answ** Inflation
The Treasury yield curve plots the yields on Treasury notes and bonds relative to
the ____ of those
securities? ** Answ** maturity
When a bond's yield to maturity is less than the bond's coupon rate, the bond: **
Answ** is selling at a premium.
What is the Fisher Effect? ** Answ** defines the relationship between real
rates, nominal rates and inflation. The formula is (1 + R) = (1 + r)(1 + h)
Relationship between YTM, maturity & interest rates ** Answ** In a normal
upward sloping curve of the yield curve, the longer till the maturity date the higher
the interest rate will be. Vice versa for downward sloping graph.
What is the relationship between bonds and interest rates? ** Answ** Inverse
What condition must exist if a bond's coupon rate is to equal both the bond's
current yield and its yield to maturity? Assume the market rate of interest for this
bond is positive ** Answ** The bond must be priced at par.
The market-required rate of return on a bond that is held for its entire life is called
the: ** Answ** yield to maturity.
Which one of the following terms applies to a bond that initially sells at a deep
discount and only makes one payment to bondholders? ** Answ** Zero
coupon
The rate of return an investor earns on a bond prior to adjusting for inflation is
called the: ** Answ** nominal rate
Bond ratings classify bonds based on: ** Answ** default risk only.
When a bond's yield to maturity is less than the bond's coupon rate, the bond: **
Answ** is selling at a premium.
Which one of the following bonds is most apt to have the smallest liquidity
premium? Treasure Bill, Corporate bond issued by a new firm, Municipal bond
issued by the state of NY, Municipal bond issued by rural city in Alaska, or
Corporate bond issued by General Motors? ** Answ** treasury bill
, The Treasury yield curve plots the yields on Treasury notes and bonds relative to
the ____ of those securities. ** Answ** maturity
Which one of the following statements is true? ** Answ** A discount bond
has a coupon rate that is less than the bond's yield to maturity.
The current yield on a bond is equal to the annual interest divided by the **
Answ** current market price
A real rate of return is defined as a rate that has been adjusted for which one of the
following? ** Answ** Inflation
The Treasury yield curve plots the yields on Treasury notes and bonds relative to
the ____ of those
securities? ** Answ** maturity
When a bond's yield to maturity is less than the bond's coupon rate, the bond: **
Answ** is selling at a premium.
What is the Fisher Effect? ** Answ** defines the relationship between real
rates, nominal rates and inflation. The formula is (1 + R) = (1 + r)(1 + h)
Relationship between YTM, maturity & interest rates ** Answ** In a normal
upward sloping curve of the yield curve, the longer till the maturity date the higher
the interest rate will be. Vice versa for downward sloping graph.
What is the relationship between bonds and interest rates? ** Answ** Inverse
