1.Which of the following will increase if the coupon rate increases? I. face val
ID: 2758061 • Letter: 1
Question
1.Which of the following will increase if the coupon rate increases?
I. face value
II. market value
III. yield-to-maturity
IV. current yield
A. I and II only
B. III and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV
2. Which one of the following statements is correct concerning discount bonds?
A. The current yield is less than the yield to maturity.
B. The bonds will be redeemed at maturity for less than face value.
C. The coupon rate is greater than the current yield.
D. The clean price is greater than the dirty price.
E. Only zero-coupon bonds sell at a discount.
3. Assuming there is no default risk, both a premium bond and a discount bond must share which one of the following characteristics?
A. market price less than a par value bond
B. yield-to-maturity less than the coupon rate
C. maturity value equal to a par value bond
D. current yield equal to that of a par value bond
E. coupon rate exceeding the yield-to-maturity
4. For a premium bond, the:
A. current yield is equal to the coupon rate but less than the yield to maturity.
B. yield to maturity exceeds both the coupon rate and the current yield.
C. coupon rate is equal to the yield to maturity but less than the current yield.
D. current yield is less than either the coupon rate or the yield to maturity.
E. coupon rate exceeds both the yield to maturity and the current yield.
Explanation / Answer
Answer for Q1 is Option C.As the coupon rate of a bond increases, the bond's interest payments increase.Increasing the coupon rate decreases the current yield.
Answer for Q2 is Option A. The current yield is less than the yield to maturity.
Answer for Q3 is Option C. The maturity value equal to a par value bond
Answer for Q4 is Option B. yield to maturity exceeds both the coupon rate and the current yield.
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