Objective questions on bond investment and interest rates


Question1: Determine which one of the following rates is the best measure of the raised purchasing power you can realize from a bond investment?

[A] Real rate

[B] Yield to maturity

[C] Yield to call

[D] Current yield

[E] Nominal rate

Question2: A deep discount bond that pays no regular interest payment is called a (an) ___ bond

[A] Zero coupon

[B]Convertible

[C] But

[D]Exotic

[E] Income

Question3: Winslow and Daughters just paid their yearly dividend of $2.2 a share. They recently announced that all future dividends will increase by 2% yearly. What is one share of this stock worth to you if you require a 14% rate of return?

[A] $18.14

[B] $18.70

[C] $18.87

[D] $18.27

[E] $18.33

Question4: A stock pays a $.80 dividend and has a market price of $20.40 a share. Calculate the dividend yield?

[A] 2.14

[B] 3.26

[C] 3.92

[D] 1.63

[E] 1.96

Question5: Which one of the following bonds tends to be the most interest rate sensitive?

[A] A 5-year, zero coupon bond

[B] A 1-year, zero coupon bond

[C]A 1-year, 9% coupon bond

[D] A 20-year, zero coupon bond

[E] A 20-year, 9% coupon bond

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Finance Basics: Objective questions on bond investment and interest rates
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