1. Zero coupon bonds typically pay interest; a. annually b. semiannually c. quar
ID: 2622875 • Letter: 1
Question
1. Zero coupon bonds typically pay interest;
a. annually
b. semiannually
c. quarterly
d. none of these
2. Zero coupon bonds usually sell;
a. at a premium
b. at a discount
c. at par value
d. at face value
3. The current price of a zero coupon bond depends on;
a. market rates of interest
b. risk
c. par value
d. all of these
4. If the market rate of interest goes up, the value of a zero coupon bond will .
a. increase
b. decrease
c. stay the same
d. there is not enough information to tell
5. Coupon bonds are also commonly known as:
a. floating rate bonds
b. LIBOR bonds
c. Treasury bills
d. none of these
6. All of the following are possible features of coupon bonds except;
a. coupon bonds can be convertible
b. coupon bonds can be callable
c. coupon bonds can be zero interest
d. all of these are possible features of coupon bonds - coupon bonds can be convertible, callable and zero interest.
7. How much interest will a 7% coupon $1,000 par value bond pay annually when the market rate of interest on similar risk bonds is 9%? Assume semi-annual interest payments.
a. $70 a year
b. $90 a year
c. $70 every six months
d. $90 every six months
8. If an investor pays $1,021 for an 8% coupon $1,000 par value bond and holds it for 7 years until it matures, the investor
Explanation / Answer
1)b. semiannually
2)b. at a discount
3)d. all of these
4)b. decrease
5)d. none of these
6)c. coupon bonds can be zero interest
7)c. $70 every six months
8)b. more than 8%
9)b. selling at a premium
10)a. interest rate risk
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