Chapter 4 Valuing Bonds Chemistry Worksheet With Answers
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21Chapter 4—Valuing Bonds
MULTIPLE CHOICE
1. A 15 year, 8%, $1000 face value bond is currently trading at $958. The yield to maturity of this bond
must be
a. less than 8%.
b. equal to 8%.
c. greater than 8%.
d. unknown.
ANS: C
DIF: E
REF: 4.2 Bond Prices and Interest Rates
2. A bond that grants the investor the right to exchange their bonds for common stock, is called a
a. zero-coupon bond.
b. Treasury bond.
c. convertible bond.
d. mortgage bond.
ANS: C
DIF: E
REF: 4.3 Types of Bonds
3. Of the following bonds, which one has the highest degree of interest rate risk?
a. 20 year 8% bond
b. 5 year 8% bond
c. 10 year 8% bond
d. Not enough information.
ANS: A
DIF: E
REF: 4.2 Bond Prices and Interest Rates
4. Which of the following information cannot be found in a bond’s indenture?
a. The coupon rate.
b. The maturity of the bond.
c. The price of the bond.
d.
None of the above.
ANS: C
DIF: E
REF: 4.3 Types of Bonds
5. Bonds issued by US states or local governments are called...
a. Treasury bonds.
b. Municipal bonds.
c. Corporate bonds.
d. Yankee bonds.
ANS: B
DIF: E
REF: 4.3 Types of Bonds
6. Bavarian Sausage just issued a 10 year 7% coupon bond. The face value of the bond is $1,000 and the
bond makes annual coupon payments. If the required return on the bond is 10%, what is the bond’s
price?
a. $815.66
b. $923.67
c. $1,000.00
d. $1,256.35
ANS: A
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