Question

Which of the following is the best definition of a corporate bond?

(a) represents ownership, where a company promises to pay a certain coupon interest payment every period and $1,000 at maturity.

(b) represents ownership and provides the holder the right to vote and a claim on residual cash flows and assets.

(c) an amortized loan that specifies a set payment that is the same for every year.

(d) a contractual obligation that provides the holder the right to vote and a claim on residual cash flows and assets.

(e) a contractual obligation, where a company promises to pay a certain coupon interest payment every period and $1,000 at maturity.

2. If general interest rates decrease dramatically, which statement is most correct?

(a) Long-term bonds will increase in value more than short-term bonds.

(b) Short-term bonds will decrease in value more than long-term bonds.

(c) Long-term bonds will decrease in value more than short-term bonds.

(d) Short-term bonds will increase in value more than long-term bonds.

(e) Long-term and short-term bonds will change in value by the same amount.

3. Wyatt Corporate issued a 20 year, 8.25% semi-annual coupon bond. This bond has a face value of $1,000 and currently sells in the market at the price of $928.69. Its YTM is 9.00% What coupon payment does this bond pay every 6 months?

(a) $39.469 (b) $45.000 (c) $20.625 (d) $41.250 (e) $41.791

4. An Apple Incorporated bond is contracted to pay a semi-annual coupon at the rate of 8.5%. This $1,000 principal bond has a YTM of 9.24% and currently sells for $942.10. What is the annual current (coupon) yield associated with this bond?

(a) 4.51% (b) 8.50% (c) 9.02% (d) 9.81% (e) 4.91%

Answer 1