10 May WHICH ONE OF THE FOLLOWING BONDS IS THE MOST INTEREST RATE SENSITIVE?
1. Which one of the following bonds is the most interest rate sensitive?10-year 5% coupon rate bond10-year 2% coupon rate bond5-year 5% coupon rate bond5-year 2% coupon rate bond2. The high-yield bond is more likely to have a higher default risk.TrueFalse3. The current yield on a bond is equal to the annual interest divided by which one of thefollowing?Issue priceFace amountCurrent market priceCurrent par value4. If a bond’s current yield exceeds its coupon rate the bond is selling at:a discount.par.a premium.5. A bond has a face value of $1 000 a market price of $1 112 and pays $81 in interest everyyear. What is the coupon rate?4.05%4.50%8.10%9.00%6. What is the price of a $1 000 face value bond if the quoted price is 102.01?$102.10$1 020.01$1 020.10$1 021.007. Analyze the 10-year 8% coupon rate (semi-annual payment) $1 000 par value bond. Thebond currently sells for $1 318. What’s the bond’s yield to maturity?5.36%4.10%2.05%6.15%8. Analyze the 10-year 8% coupon rate (semi-annual payment) $1 000 par value bond. Thebond currently sells for $1 318. What’s the bond’s current yield and capital gain yield?6.07% 0.71%6.07% -0.71%6.07% 1.97%6.07% -1.97%9. An 8% $1 000 bond matures in 13 years pays interest annually and has a yield to maturity of9.5%. What is the current market price of the bond?______$889.35$1 000$890.63$903.6210. If you earned a rate of return of 8% on your bond investments last year. During that time theinflation rate was 2.68%. What is your real rate of return?5.18%4.17%3.68%6.20%
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