# FINANCE

55. **Yield to Call** A 7.25 percent coupon bond with 25 years left to maturity can be called in 5 years. The call premium is one year of coupon payments. It is offered for sale at $1066.24. What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and par value is $1,000.)

A. 3.41%

B. 3.45%

C. 3.51%

D. 6.90%

56. **Yield to Call** A 4.75 percent coupon bond with 12 years left to maturity can be called in 2 years. The call premium is one year of coupon payments. It is offered for sale at $1037.35. What is the yield to call of the bond? (Assume that interest payments are paid semi-annually and par value is $1,000.)

A. 4.60%

B. 4.68%

C. 4.75%

D. 5.05%

57. **Comparing Bond Yields** A client in the 33 percent marginal tax bracket is comparing a municipal bond that offers a 5 percent yield to maturity and a similar-risk corporate bond that offers a 6.25 percent yield. Which bond will give the client more profit after taxes?

A. the municipal bond

B. the corporate bond

C. Both give the client equal profits after taxes.

D. There is not enough information given to determine.

58. **Comparing Bond Yields** A client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 3.25 percent yield to maturity and a similar-risk corporate bond that offers a 4.10 percent yield. Which bond will give the client more profit after taxes?

A. the municipal bond

B. the corporate bond

C. Both give the client equal profits after taxes.

D. There is not enough information given to determine answer.

59. **Comparing Bond Yields** A client in the 35 percent marginal tax bracket is comparing a municipal bond that offers a 4.25 percent yield to maturity and a similar-risk corporate bond that offers a 5.10 percent yield. Which bond will give the client more profit after taxes?

A. the municipal bond

B. the corporate bond

C. Both give the client equal profits after taxes.

D. There is not enough information given to determine answer.

60. **TIPS Total Return** Reconsider a 3.25% TIPS that was issued with CPI reference of 186.7. The bond is purchased at the beginning of the year (after the interest payment), when the CPI was 197.5. For the interest in the middle of the year, the CPI was 201.1. Now, at the end of the year, the CPI is 202.4 and the interest payment has been made. What is the total return of the TIPS in percentage terms for the year? (Assume semi-annual interest payments and $1,000 par value.)

A. 1.6%

B. 2.4%

C. 5.8%

D. 9.1%

61. **Bond Prices and Interest Rate Changes** A 6.75 percent coupon bond with 10 years left to maturity is priced to offer a 6.5 percent yield to maturity. You believe that in one year, the yield to maturity will be 6.65 percent. If this occurs, what would be the total return of the bond in percent? (Assume semi-annual interest payments and $1,000 par value.)

A. 5.5%

B. 5.6%

C. 6.6%

D. 6.7%

62. **Bond Prices and Interest Rate Changes** A 7.25 percent coupon bond with 25 years left to maturity is priced to offer a 7 percent yield to maturity. You believe that in one year, the yield to maturity will be 7.15 percent. If this occurs, what would be the total return of the bond in percent? (Assume semi-annual interest payments and $1,000 par value.)

A. 3.5%

B. 5.3%

C. 7.0%

D. 7.15%

63. **Yields of a Bond** A 3.25 percent coupon municipal bond has 12 years left to maturity and has a price quote of 98.75. The bond can be called in 5 years. The call premium is one year of coupon payments. What is the bond’s taxable equivalent yield for an investor in the 35 percent marginal tax bracket? (Assume interest payments are paid semi-annually and a par value of $5,000.)

A. 3.38%

B. 5.00%

C. 5.20%

D. 10.12%