B) False
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A) If rates fall after its issue,a zero coupon bond could trade at a price above its par value.
B) If rates fall rapidly,a zero coupon bond's expected appreciation could become negative.
C) If a firm moves from a position of strength toward financial distress,its bonds' yield to maturity would probably decline.
D) If a bond is selling at a premium,this implies that its yield to maturity exceeds its coupon rate.
E) If a coupon bond is selling at par,its current yield equals its yield to maturity.
G) A) and D)
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E
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A) An indenture is a bond that is less risky than a mortgage bond.
B) The expected return on a corporate bond will generally exceed the bond's yield to maturity.
C) If a bond's coupon rate exceeds its yield to maturity,then its expected return to investors exceeds the yield to maturity.
D) Under our bankruptcy laws,any firm that is in financial distress will be forced to declare bankruptcy and then be liquidated.
E) All else equal,senior debt generally has a lower yield to maturity than subordinated debt.
G) B) and E)
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B) False
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A) If a coupon bond is selling at a discount,its price will continue to decline until it reaches its par value at maturity.
B) If interest rates increase,the price of a 10-year coupon bond will decline by a greater percentage than the price of a 10-year zero coupon bond.
C) If a bond's yield to maturity exceeds its annual coupon,then the bond will trade at a premium.
D) If a coupon bond is selling at a premium,its current yield equals its yield to maturity.
E) If a coupon bond is selling at par,its current yield equals its yield to maturity.
G) B) and D)
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B) False
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True
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B) False
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A) 8.56%
B) 9.01%
C) 9.46%
D) 9.93%
E) 10.43%
G) B) and E)
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B) False
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A) One year from now,Bond A's price will be higher than it is today.
B) Bond A's current yield is greater than 8%.
C) Bond A has a higher price than Bond B today,but one year from now the bonds will have the same price.
D) Both bonds have the same price today,and the price of each bond is expected to remain constant until the bonds mature.
E) Bond B has a higher price than Bond A today,but one year from now the bonds will have the same price.
G) A) and D)
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A) 1.90%
B) 2.09%
C) 2.30%
D) 2.53%
E) 2.78%
G) A) and D)
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A) 7.39%
B) 7.76%
C) 8.15%
D) 8.56%
E) 8.98%
G) A) and E)
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A) If a bond's yield to maturity exceeds its coupon rate,the bond will sell at par.
B) All else equal,if a bond's yield to maturity increases,its price will fall.
C) If a bond's yield to maturity exceeds its coupon rate,the bond will sell at a premium over par.
D) All else equal,if a bond's yield to maturity increases,its current yield will fall.
E) A zero coupon bond's current yield is equal to its yield to maturity.
G) B) and E)
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A) 20-year,10% coupon bond.
B) 20-year,5% coupon bond.
C) 1-year,10% coupon bond.
D) 20-year,zero coupon bond.
E) 10-year,zero coupon bond.
G) All of the above
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A) The bond is selling below its par value.
B) The bond is selling at a discount.
C) If the yield to maturity remains constant,the bond's price one year from now will be lower than its current price.
D) The bond's current yield is greater than 9%.
E) If the yield to maturity remains constant,the bond's price one year from now will be higher than its current price.
G) B) and C)
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B) False
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False
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A) 6.20%
B) 6.53%
C) 6.87%
D) 7.24%
E) 7.62%
G) A) and C)
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A) $839.31
B) $860.83
C) $882.90
D) $904.97
E) $927.60
G) All of the above
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A) If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds,we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of debentures.
B) In this situation,we cannot tell for sure how,or whether,the firm's total interest expense on the $100 million of debt would be affected by the mix of debentures versus first mortgage bonds.The interest rate on each of the two types of bonds would increase as the percentage of mortgage bonds used was increased,but the result might well be such that the firm's total interest charges would not be affected materially by the mix between the two.
C) The higher the percentage of debentures,the greater the risk borne by each debenture,and thus the higher the required rate of return on the debentures.
D) If the debt were raised by issuing $50 million of debentures and $50 million of first mortgage bonds,we could be certain that the firm's total interest expense would be lower than if the debt were raised by issuing $100 million of first mortgage bonds.
E) The higher the percentage of debt represented by mortgage bonds,the riskier both types of bonds will be and,consequently,the higher the firm's total dollar interest charges will be.
G) All of the above
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A) $891.00
B) $913.27
C) $936.10
D) $959.51
E) $983.49
G) B) and C)
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