# FINANCE

23. Which of the following terms is the chance that the bond issuer will not be able to make timely payments?

A. credit quality risk

B. interest rate risk

C. liquidity of interest rate risk

D. term structure of interest rates

24. Which of the following bonds carry significant risk that the issuer will not make current or future payments?

A. credit quality risk bonds

B. interest rate risk bonds

C. liquidity rate risk bonds

D. junk bonds

25. **Interest Payments** Determine the interest payment for the following three bonds: 5½ percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.)

A. $5.50, $6.45, $0, respectively

B. $27.50, $32.25, $0, respectively

C. $27.50, $32.25, $100, respectively

D. $55.00, $64.50, $0, respectively

26. **Interest Payments** Determine the interest payment for the following three bonds: 2½ percent coupon corporate bond (paid semi-annually), 3.15 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.)

A. $2.50, $3.15, $0, respectively

B. $12.50, $15.75, $0, respectively

C. $12.50, $15.75, $100, respectively

D. $25.00, $31.50, $0, respectively

27. **Interest Payments** Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon Treasury note, and a corporate zero coupon bond maturing in 15 years. (Assume a $1,000 par value.)

A. $4.00, $4.75, $0, respectively

B. $20.00, $23.75, $0, respectively

C. $20.00, $23.75, $150, respectively

D. $40.00, $47.50, $0, respectively

28. **Time to Maturity** A bond issued by a corporation on June 15, 2007, is scheduled to mature on June 15, 2017. If today is December 16, 2008, what is this bond’s time to maturity? (Assume annual interest payments.)

A. 1 year, 6 months

B. 8 years

C. 8 years, 6 months

D. 10 years

29. **Time to Maturity** A bond issued by a corporation on May 1, 1999, is scheduled to mature on May 1, 2019. If today is May 2, 2009, what is this bond’s time to maturity? (Assume annual interest payments.)

A. 9 years

B. 10 years

C. 19 years

D. 20 years

30. **Time to Maturity** A bond issued by a corporation on October 1, 2007, is scheduled to mature on October 1, 3007. If today is October 2, 2009, what is this bond’s time to maturity? (Assume annual interest payments.)

A. 2 years

B. 50 years

C. 998 years

D. 100 years

31. **Call Premium** A 5.5 percent corporate coupon bond is callable in four years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond? (Assume annual interest payments.)

A. $55

B. $220

C. $1000

D. $1055

32. **Call Premium** A 6 percent corporate coupon bond is callable in ten years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?

A. $60

B. $600

C. $1000

D. $1060

33. **Call Premium** A 4.5 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond?

A. $45

B. $225

C. $1000

D. $1045

34. **TIPS Interest and Par Value** A 2½ percent TIPS has an original reference CPI of 170.4. If the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

A. $1000, $7.16, respectively

B. $1000, $15.09, respectively

C. $1207.16, $7.16, respectively

D. $1207.16, $15.09, respectively

35. **TIPS Interest and Par Value** A 3 3/4 percent TIPS has an original reference CPI of 175.8. If the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.)

A. $1000, $18.75, respectively

B. $1000, $37.50, respectively

C. $1181.46, $22.15, respectively

D. $1181.46, $37.50, respectively

36. **Bond Quotes** Consider the following three bond quotes; a Treasury note quoted at 87:25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

A. $872.50, $1000, $1000, respectively

B. $1000, $1000, $1000, respectively

C. $877.81, $1024.20, $5072.50, respectively

D. $1000, $1024.20, $1001.45, respectively

37. **Bond Quotes** Consider the following three bond quotes; a Treasury note quoted at 102:30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars?

A. $1002.30, $1000, $1000, respectively

B. $1000, $1000, $5000, respectively

C. $1002.30, $994.50, $5012.25 respectively

D. $1029.38, $994.50, $5122.50, respectively

38. **Zero Coupon Bond Price** Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.)

A. $553.68

B. $558.66

C. $940.00

D. $1000.00

39. **Zero Coupon Bond Price** Calculate the price of a zero coupon bond that matures in 5 years if the market interest rate is 7.50 percent. (Assume semi-annual compounding and $1,000 par value.)

A. $692.02

B. $696.57

C. $962.50

D. $1000.00