Question 1

If Tom sells a bond before it matures, he will most likely catch the bond between coupon payment dates. Then what will he get?

Accepted Answer

A)  He will only get the principal value of the bond.
B)  He will only get the face value of the bond.
C)  He will get the price of the bond plus the accrued interest that the bond has earned up to the sale date.
D)  He will get the price of the bond pus the accrued interest that the bond earns until its maturity date.E) C) and D)
F) A) and B)

Question 2

Suppose two bonds are trading in the secondary market. They have the same maturity date and similar credit quality, but one has a nominal yield of 4% while the other has one of 8%. What does this really tell you about the two bonds?

Accepted Answer

A)  One is more attractive than the other.
B)  Two bonds must be different in values.
C)  Two bonds must have been issued by different lenders.
D)  Two bonds must have been issued at different times.E) None of the above
F) B) and D)

Question 3

The maturity date of a bond is...

Accepted Answer

A)  The date on which the principal amount of a bond is to be paid in full.
B)  The date on which the bond expires.
C)  The date on which the bond's interest is paid.
D)  The date on which the bond is issued.E) A) and B)
F) A) and C) A

Question 4

A bond's yield to maturity (YTM)  rate is the rate of return you receive if you hold a bond until it matures and reinvest all the interest payments at the YTM rate. What factors determine the YTM of a bond?

Accepted Answer

A)  A bond's term to maturity.
B)  Uncertainty in price.
C)  Risk.
D)  All of the above.E) All of the above
F) A) and B)

Question 5

A bond is often referred to as being short-, medium- or long-term depending on its maturity. What type of bond is a two-year bond?

Accepted Answer

A)  A short-term bond.
B)  A medium-term bond.
C)  An intermediate-term bond.
D)  A long-term bond.E) A) and C)
F) B) and C)

Question 6

Tom is thinking of buying zero-coupon bonds. What are these bonds?

Accepted Answer

A)  They are bonds that don't make regular interest payments.
B)  They are bonds that mature within a year.
C)  They are bonds whose accrued interests add up to more than 0.
D)  They are bonds that have a special number zero to distinguish them from normal bonds.E) A) and B)
F) C) and D) A

Question 7

Tom is thinking to buy bonds. However, he is debating between long-term bonds and short-term bonds. What factors will influence his decision?

Accepted Answer

A)  His available funds.
B)  His risk preferences.
C)  The relative yields between short-term and long-term bonds.
D)  His personal patience level.E) All of the above
F) A) and D) C

Exam 2: Bond

If Tom sells a bond before it matures, he will most likely catch the bond between coupon payment dates. Then what will he get?

Correct Answer
verified

Suppose two bonds are trading in the secondary market. They have the same maturity date and similar credit quality, but one has a nominal yield of 4% while the other has one of 8%. What does this really tell you about the two bonds?

Correct Answer
verified

The maturity date of a bond is...

Correct Answer
verified
A

A bond's yield to maturity (YTM) rate is the rate of return you receive if you hold a bond until it matures and reinvest all the interest payments at the YTM rate. What factors determine the YTM of a bond?

Correct Answer
verified

A bond is often referred to as being short-, medium- or long-term depending on its maturity. What type of bond is a two-year bond?

Correct Answer
verified

Tom is thinking of buying zero-coupon bonds. What are these bonds?

Correct Answer
verified
A

Tom is thinking to buy bonds. However, he is debating between long-term bonds and short-term bonds. What factors will influence his decision?

Correct Answer
verified
C

Exam 2: Bond

If Tom sells a bond before it matures, he will most likely catch the bond between coupon payment dates. Then what will he get?

Correct AnswerverifiedShow Answer

Suppose two bonds are trading in the secondary market. They have the same maturity date and similar credit quality, but one has a nominal yield of 4% while the other has one of 8%. What does this really tell you about the two bonds?

Correct AnswerverifiedShow Answer

The maturity date of a bond is...

Correct AnswerverifiedA

A bond's yield to maturity (YTM) rate is the rate of return you receive if you hold a bond until it matures and reinvest all the interest payments at the YTM rate. What factors determine the YTM of a bond?

Correct AnswerverifiedShow Answer

A bond is often referred to as being short-, medium- or long-term depending on its maturity. What type of bond is a two-year bond?

Correct AnswerverifiedShow Answer

Tom is thinking of buying zero-coupon bonds. What are these bonds?

Correct AnswerverifiedA

Tom is thinking to buy bonds. However, he is debating between long-term bonds and short-term bonds. What factors will influence his decision?

Correct AnswerverifiedC

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified
C