Finance 3050 Homework #10

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homework #10, 3050
Student: ____________________________________________________________

_______________
1. The invoice price of a bond is the ______.
A. stated or flat price in a quote sheet plus accrued interest B. stated or flat price in a quote sheet minus accrued interest C. bid price
D. average of the bid and ask price

2. A mortgage bond is _______.
A. secured by other securities held by the firm
B. secured by equipment owned by the firm
C. secured by property owned by the firm
D. unsecured

3. You buy a TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns out to be 2%, 3% and 4% over the next three years. The total annual coupon income you will receive in year three is _________. A. $30.00

B. $33.00
C. $32.78
D. $30.90

4. A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is _________. A. 6.00%

B. 6.58%
C. 7.20%
D. 8.00%

5. A coupon bond which pays interest semi-annually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be __________ (to the nearest dollar). A. $1,000

B. $1,063
C. $1,081
D. $1,100

6. A coupon bond pays semi-annual interest is reported as having an ask price of 117% of its $1,000 par value in the Wall Street Journal. If the last interest payment was made 2 months ago and the coupon rate is 6%, the invoice price of the bond will be _________. A. $1,140

B. $1,170
C. $1,180
D. $1,200

7. The __________ of a bond is computed as the ratio of coupon payments to market price. A. nominal yield
B. current yield
C. yield to maturity
D. yield to call

8. A 6% coupon U.S. treasury note pays interest on May 31 and November 30 and is traded for settlement on August 10. The accrued interest on $100,000 face amount of this note is _________. A. $581.97

B. $1,163.93
C. $2,327.87
D. $3,000.00

homework #10, 3050 Key

1. The invoice price of a bond is the ______.
A. stated or flat price in a quote sheet plus accrued interest B. stated or flat price in a quote sheet minus accrued interest C. bid price
D. average of the bid and ask price

Bodie - Chapter 10 #1
Difficulty: Medium

2. A mortgage bond is _______.
A. secured by other securities held by the firm
B. secured by equipment owned by the firm
C. secured by property owned by the firm
D. unsecured

Bodie - Chapter 10 #4
Difficulty: Easy

3. You buy a TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns out to be 2%, 3% and 4% over the next three years. The total annual coupon income you will receive in year three is _________. A. $30.00

B. $33.00
C. $32.78
D. $30.90
($30)(1.02)(1.03)(1.04) = $32.78

Bodie - Chapter 10 #20
Difficulty: Medium

4. A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call on this bond is _________. A. 6.00%

B. 6.58%
C. 7.20%
D. 8.00%
1055.84 = 60

Bodie - Chapter 10 #41
Difficulty: Medium

5. A coupon bond which pays interest semi-annually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be __________ (to the nearest dollar). A. $1,000

B. $1,063
C. $1,081
D. $1,100
= 1,063

Bodie - Chapter 10 #42
Difficulty: Medium

6. A coupon bond pays semi-annual interest is reported as having an ask price of 117% of its $1,000 par value in the Wall Street Journal. If the last interest payment was made 2 months ago and the coupon rate is 6%, the invoice price of the bond will be _________. A. $1,140

B. $1,170
C. $1,180
D. $1,200
Invoice Price =

Bodie - Chapter 10 #44...
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