Fin 601 Final Exam - Multiple Choice Questions & Answers

User
Ms Julie Ciarlante
Course
FIN-601-001 - FA 13-14
Test
FIN 601 Final Exam
Started
12/12/13 7:19 PM
Submitted
12/12/13 9:25 PM
Status
Completed
Attempt Score
126 out of 135 points
Time Elapsed
2 hours, 5 minutes out of 5 hours.

Question 1
3 out of 3 points

A bond with an annual coupon of $70 and originally sold at par for $1,000. The current market interest rate (yield to maturity) is 8%. This bond will sell at _______. Assuming no change in market interest rates, the bond will present the holder with capital ________ as it matures.
.
Answer

Selected Answer: B. discount; gains
Correct Answer: B. discount; gains

Question 2
3 out of 3 points

Given two comparable bonds A and B with par values of $1000. Both bonds mature in twenty years. Bond A has a coupon rate of 15%. Bond B has a coupon rate of 9%. Which bond has the greater interest rate risk?
.
Answer

Selected Answer: B.
Bond B
Correct Answer: B.
Bond B

Question 3
3 out of 3 points

Davy Crockett, Inc. has an 8 percent coupon bond that matures in 8 years. The bond pays interest semiannually. What is the market price of the $1,000 face value bond if the yield to maturity is 10%?
.
Answer

Selected Answer: A.
$891.62
Correct Answer: A.
$891.62

Question 4
3 out of 3 points

If its yield to maturity is less than its coupon rate, a bond will sell at a _____, and increases in market interest rates will _____.
.
Answer

Selected Answer: C. premium; decrease this premium.
Correct Answer: C. premium; decrease this premium.

Question 5
3 out of 3 points

The lowest Moody’s bond rating category considered to be of investment grade quality is:
.
Answer

Selected Answer: C.
Baa
Correct Answer: C.
Baa

Question 6
3 out of 3 points

Given a bond with 8 years to maturity, $1000 face value, 8% coupon, 9% yield to