第三章利率和估值[英文习题和的答案解析]

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Chapter 3

What Do Interest Rates Mean and What Is Their Role in Valuation?

3.1

Single Choice

1) A loan that requires the borrower to make the same payment every period until the maturity

date is called a

A) simple loan.

B) fixed-payment loan.

C) discount loan.

D) same-payment loan.

E) none of the above.

2) A coupon bond pays the owner of the bond

A) the same amount every month until maturity date.

B) a fixed interest payment every period and repays the face value at the maturity date.

C) the face value of the bond plus an interest payment once the maturity date has been reached.

D) the face value at the maturity date.

E) none of the above.

3) A bond's future payments are called its

A) cash flows.

B) maturity values.

C) discounted present values.

D) yields to maturity.

4) A credit market instrument that pays the owner the face value of the security at the maturity

date and nothing prior to then is called a

A) simple loan.

B) fixed-payment loan.

C) coupon bond.

D) discount bond.

5) (I) A simple loan requires the borrower to repay the principal at the maturity date along with an

interest payment. (II) A discount bond is bought at a price below its face value, and the face value

is repaid at the maturity date.

A) (I) is true, (II) false.

B) (I) is false, (II) true.

C) Both are true.

D) Both are false.

6) Which of the following are true of coupon bonds?

A) The owner of a coupon bond receives a fixed interest payment every year until the maturity

date, when the face or par value is repaid.

B) U.S. Treasury bonds and notes are examples of coupon bonds.

C) Corporate bonds are examples of coupon bonds.

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D) All of the above.

E) Only A and B of the above.

7) Which of the following are generally true of all bonds?

A)

The

longer

a

bond's

maturity,

the

lower

is

the

rate

of

return

that

occurs

as

a

result

of

the

increase in an interest rate. B) Even though a bond has a substantial initial interest rate, its return

can turn out to be negative if interest rates rise. C) Prices and returns for long-term bonds are more

volatile than those for shorter-term bonds.

D) All of the above are true.

E) Only A and B of the above are true.

8) (I) A discount bond requires the borrower to repay the principal at the maturity

date plus an

interest payment. (II) A coupon bond pays the lender a fixed interest payment every year until the

maturity date, when a specified final amount (face or par value) is repaid.

A) (I) is true, (II) false.

B) (I) is false, (II) true.

C) Both are true.

D) Both are false.

9) If a $$5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year

is

A) $$650.

B) $$1,300.

C) $$130.

D) $$13.

E) None of the above.

10) An $$8,000 coupon bond with a $$400 annual coupon payment has a coupon rate of

A) 5 percent.

B) 8 percent.

C) 10 percent.

D) 40 percent.

11) The concept of _________ is based on the common-sense notion that a dollar paid to you in

the future is less valuable to you than a dollar today.

A) present value

B) future value

C) interest

D) deflation

12) Dollars received in the future are worth _________ than dollars received today. The process of

calculating what dollars received in the future are worth today is called _________

A) more; discounting.

B) less; discounting.

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C) more; inflating.

D) less; inflating.

13) The process of calculating what dollars received in the future are worth today is called

A) calculating the yield to maturity.

B) discounting the future.

C) compounding the future.

D) compounding the present.

14) With an interest rate of 5 percent, the present value of $$100 received one year from now is

approximately

A) $$100.

B) $$105.

C) $$95.

D) $$90.

15) With an interest rate of 10 percent, the present value of a security that pays $$1,100 next year

and $$1,460 four years from now is approximately

A) $$1,000.

B) $$2,000.

C) $$2,560.

D) $$3,000.

16) With an interest rate of 8 percent, the present value of $$100 received one year from now is

approximately

A) $$93.

B) $$96.

C) $$100.

D) $$108.

17) With an interest rate of 6 percent, the present value of $$100 received one year from now is

approximately

A) $$106.

B) $$100.

C) $$94.

D) $$92.

18)

The

interest

rate

that

equates

the

present

value

of

the

cash

flow

received

from

a

debt

instrument with its market price today is the

A) simple interest rate.

B) discount rate.

C) yield to maturity.

D) real interest rate.

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19) The interest rate that financial economists consider to be the most accurate measure is the

A) current yield.

B) yield to maturity.

C) yield on a discount basis.

D) coupon rate.

20)

Financial

economists

consider

the

_________

to

be

the

most

accurate

measure

of

interest

rates.

A) simple interest rate

B) discount rate

C) yield to maturity

D) real interest rate

21) For a simple loan, the simple interest rate equals the

A) real interest rate.

B) nominal interest rate.

C) current yield.

D) yield to maturity.

22) For simple loans, the simple interest rate is _________ the yield to maturity.

A) greater than

B) less than

C) equal to

D) not comparable to

23) The yield to maturity of a one- year, simple loan of $$500 that requires an interest payment of

$$40 is

A) 5 percent.

B) 8 percent.

C) 12 percent.

D) 12.5 percent.

24) The yield to maturity of a one-year, simple loan of $$400 that requires an interest payment of

$$50 is

A) 5 percent.

B) 8 percent.

C) 12 percent.

D) 12.5 percent.

25) A $$10,000, 8 percent coupon bond that sells for $$10,000 has a yield to maturity of

A) 8 percent.

B) 10 percent.

C) 12 percent.

D) 14 percent.

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26) Which of the following $$1,000 face value securities has the highest yield to maturity?

A) A 5 percent coupon bond selling for $$1,000

B) A 10 percent coupon bond selling for $$1,000

C) A 12 percent coupon bond selling for $$1,000

D) A 12 percent coupon bond selling for $$1,100

27) Which of the following $$1,000 face value securities has the highest yield to maturity?

A) A 5 percent coupon bond selling for $$1,000

B) A 10 percent coupon bond selling for $$1,000

C) A 15 percent coupon bond selling for $$1,000

D) A 15 percent coupon bond selling for $$900

28) Which of the following are true for a coupon bond?

A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.

B) The price of a coupon bond and the yield to maturity are negatively related.

C)

The

yield

to

maturity

is

greater

than

the

coupon

rate

when

the

bond

price

is

below

the

par

value.

D) All of the above are true.

E) Only A and B of the above are true.

29) Which of the following are true for a coupon bond?

A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.

B) The price of a coupon bond and the yield to maturity are negatively related.

C)

The

yield

to

maturity

is

greater

than

the

coupon

rate

when

the

bond

price

is

above

the

par

value.

D) All of the above are true.

E) Only A and B of the above are true.

30) Which of the following are true for a coupon bond?

A) When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate.

B) The price of a coupon bond and the yield to maturity are positively related.

C)

The

yield

to

maturity

is

greater

than

the

coupon

rate

when

the

bond

price

is

above

the

par

value.

D) All of the above are true.

E) Only A and B of the above are true.

31) A consol bond is a bond that

A) pays interest annually and its face value at maturity.

B) pays interest in perpetuity and never matures.

C) pays no interest but pays face value at maturity.

D) rises in value as its yield to maturity rises.

32) The yield to maturity on a consol bond that pays $$100 yearly and sells for $$500 is

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A) 5 percent.

B) 10 percent.

C) 12.5 percent.

D) 20 percent.

E) 25 percent.

33) The yield to maturity on a consol bond that pays $$200 yearly and sells for $$1000 is

A) 5 percent.

B) 10 percent.

C) 20 percent.

D) 25 percent.

34) A frequently used approximation for the yield to maturity on a long- term bond is the

A) coupon rate.

B) current yield.

C) cash flow interest rate.

D) real interest rate.

35) The current yield on a coupon bond is the bond's _________ divided by its _________.

A) annual coupon payment; price

B) annual coupon payment; face value

C) annual return; price

D) annual return; face value

36) When a bond's price falls, its yield to maturity _________ and its current yield _________.

A) falls; falls

B) rises; rises

C) falls; rises

D) rises; falls

37) The yield to maturity for a one-year discount bond equals

A) the increase in price over the year, divided by the initial price.

B) the increase in price over the year, divided by the face value.

C) the increase in price over the year, divided by the interest rate.

D) none of the above.

38) If a $$10,000 face value discount bond maturing in one year is selling for $$8,000, then its yield

to maturity is

A) 10 percent.

B) 20 percent.

C) 25 percent.

D) 40 percent.

39) If a $$10,000 face value discount bond maturing in one year is selling for $$9,000, then its yield

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