Question : 21.A two-year bond offers a yield of 6% and a : 1325666

 

 

21.A two-year bond offers a yield of 6% and a three year bond offers a yield of 7.5%. Under the expectations theory what should be the yield on a one year bond in two years?

a.5.95%

b.10.56%

c.3.06%

d.12.49%

 

 

 

22.The yield on a one-year bond is 6% today and is expected to be 8.5% next year. Based on the expectations theory, what is the yield of a two year bond today?

a.15.01%

b.12.68%

c.5.67%

d.7.24%

 

 

 

 

23.You are looking up bond prices in the newspaper and you find the following quote for a $1,000 face value treasury bond: 103:26. What is the price of this bond?

a.$103.26

b.$1,038.13

c.$1,032.60

d.$1,000

 

 

 

24.You have the choice between investing in a corporate bond with a yield of 8% or a municipal bond. If your marginal tax rate is 28%, what should be the yield on the municipal bond in order to be competitive?

a.8.00%

b.5.76%

c.11.11%

d.13.69%

 

 

 

25.You have the choice between investing in a corporate bond or a municipal bond with a yield of 8%. If your marginal tax rate is 28%, what should be the yield on the corporate bond in order to be competitive?

a.8.00%

b.5.76%

c.13.64%

d.11.11%

 

 

 

26.McLaughlin Enterprises has an outstanding $1,000 par value bond with a 11% coupon that pays at the end of each year. The bond matures in nine years. Bonds of similar risk have a required return of 10%. What is the market value of the McLaughlin bond?

a.$890.00

b.$1,053.35

c.$1,000.00

d.$1,057.59

 

 

 

27.Winburn Sports & Entertainment has an outstanding $1,000 par value bond with a 11% coupon that pays semiannually at the end of each period. The bond matures in nine years. Bonds of similar risk have a required return of 10%. What is the market value of the Winburn bond?

a.$1,035.54

b.$1,057.59

c.$1,058.45

d.$1,073.05

 

 

 

28.A 10-year Treasury bond with par value of $1,000 has a 6% coupon rate and pays interest every six months. The bond is three years old and has just made its sixth payment. The market now only requires a 5% return on the bond. What is the expected price of the bond?

a.$802.03

b.$1,058.45

c.$1,077.95

d.$1,350.73

 

 

 

29.A $1,000 par value bond that makes annual interest payments of $50 and matures in four years sells for $980. What is the yield to maturity of the bond?

a.5.57%

b.2.47%

c.4.54%

d.2.04%

 

 

 

30.Alexis Media issued five-year bonds one year ago with a 7.5% coupon that pays semi-annually (the bonds just paid the second coupon payment). Alexis announced a revised advertising revenue forecast that is quite bleak compared with the prevailing forecast at the time of the bond issuance. Investors now require a 9% return on Alexis bonds. What is the percent change in price of the bonds associated with the change in business conditions?

a.4.95% decrease

b.8.30% decrease

c.29.06% decrease

d.19.79% increase

e.Can’t determine with the information given

 

 

 

 

 

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