9) Which of the following statements is false? A) The difference between an annu
ID: 2667925 • Letter: 9
Question
9)Which of the following statements is false?
A) The difference between an annuity and a perpetuity is that an annuity ends after some fixed number of payments.
B) Most car loans, mortgages, and some bonds are annuities.
C) An annuity is a stream of N equal cash flows paid at irregular intervals.
D) A growing perpetuity is a cash flow stream that occurs at regular intervals and grows at a constant rate forever
11) The British government has a consol bond outstanding that pays £100 in interest each year. Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now, then the value of the consol bond is closest to:
A) £2000
B) £1000
C) £2100
D) £1100
15)
Which of the following statements is false?
A) The yield to maturity for a zero-coupon bond is the return you will earn as an investor from holding the bond to maturity and receiving the promised face value payment.
B) When prices are quoted in the bond market, they are conventionally quoted in increments of $1000.
C) The IRR of an investment opportunity is the discount rate at which the NPV of the investment opportunity is equal to zero.
D) Zero-coupon bonds are also called pure discount bonds.
18) Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity. If the bond is currently trading for $459, then the yield to maturity on this bond is closest to:
A) 9.7%
B) 10.4%
C) 7.5%
D) 8.1%
23) A corporate bond which receives a BBB rating from Standard and Poor's is considered
A) an investment grade bond.
B) a defaulted bond.
C) a junk bond.
D) a high-yield bond.
Explanation / Answer
Which of the following statements is false? C) An annuity is a stream of N equal cash flows paid at irregular intervals. (It should be regular intervals) 11) The British government has a consol bond outstanding that pays £100 in interest each year. Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now, then the value of the consol bond is closest to: A) £2000 (Value = 100 / 0.05) Which of the following statements is false? B) When prices are quoted in the bond market, they are conventionally quoted in increments of $1000. 18) Consider a zero-coupon bond with a $1000 face value and 10 years left until maturity. If the bond is currently trading for $459, then the yield to maturity on this bond is closest to: D) 8.1% 23) A corporate bond which receives a BBB rating from Standard and Poor's is considered A) an investment grade bond.
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