Suppose you buy a 25-year pure discount bond with a face value of $1,0

1.For an option-free bond, what are the effects of the convexity adjustment on the magnitude (absolute value) of the approximate bond price change in response to an increase in yield and in response to a decrease in yield, respectively Decrease in yield Increase in yield（）选项： A、Increase in magnitude Decrease in magnitude B、Increase in magnitude Increase in magnitude C、Decrease in magnitude Decrease in magnitude

2.Determine the most appropriate effect of changes in bond yield on the fair value of the bond. 选项： A: An increase in bond yield will decrease the fair value of the bond liability, and the loss will be recognized in the income statement. B: An increase in bond yield will decrease the fair value of the bond liability, and the gain will be recognized in the income statement. C: A decrease in bond yield will decrease the fair value of the bond liability, and the gain will be recognized in the income statement.

3.The Corner Grocer has a 7-year, 6.5 percent semiannual coupon bond outstanding with a $1,000 par value. The bond has a yield to maturity of 5.5 percent. Which one of the following statements is correct if the market yield suddenly increases to 7.25 percent? 选项： A:The bond price will decrease by 9.27 percent. B:The bond price will increase by 7.04 percent. C:The bond price will decrease by 8.64 percent. D: The bond price will increase by 7.16 percent. E:The bond price will increase by 3.86 percent.

4.You are purchasing a 25-year, zero-coupon bond. The yield to maturity is 8.68 percent and the face value is $1,000. What is the current market price? （）选项： A: $106.67 B:$108.18 C:$119.52 D:$121.50

5.You are considering two Treasury bonds. Bond A has a 9 percent annual coupon, and Bond B has a 6 percent annual coupon. Both bonds have a yield to maturity of 7 percent. Assume that the yield to maturity is expected to remain at 7 percent. Which of the following statements is most correct?( )选项： A:If the yield to maturity remains at 7 percent, the price of both bonds will increase by 7 percent per year. B:If the yield to maturity remains at 7 percent, the price of both bonds will increase over time, but the price of Bond A will increase by more. C:If the yield to maturity remains at 7 percent, the price of both bonds will remain unchanged. D:If the yield to maturity remains at 7 percent, the price of Bond A will decrease over time, but the price of Bond B will increase over time. E:If the yield to maturity remains at 7 percent, the price of Bond B will decrease over time, but the price of Bond A will increase over time.

6.There are two bonds with the same face value $1,000. One maturity is three years, while the other one is 5 years. Both bonds have the annual coupon payments $50. Which of the following statement is NOT correct? 选项： A: For both bonds, higher interest rates cause the bond to sell for a discount.; B:For both bonds, lower interest rates cause the bond to sell for a premium.; C:When the interest rate increases, the price of the 5-year bond is higher than the price of the 3-year bond.; D:When the interest rate decreases, the increase of prices is greater for the 5-year bond than for the 3-year bond.

7.A 10-year bond pays an annual coupon. The bond has a yield to maturity of 8 percent. The bond currently trades at a premium--its price is above the par value of $1,000. Which of the following statements is most correct? ( )选项： A:If the yield to maturity remains at 8 percent, then the bond’s price will decline over the next year. B:The bond’s current yield is less than 8 percent. C:If the yield to maturity remains at 8 percent, then the bond’s price will remain the same over the next year. D:The bond’s coupon rate is less than 8 percent. E:If the yield to maturity increases, then the bond’s price will increase.

8.What is the current yield on a five-year 5% coupon bond with $100 face value? Suppose the bond’s yield to maturity is 7%. Assume annual compounding. 选项： A、5.26% B、5.36% C、5.46% D、5.56%

9.Which of the following statements is FALSE?选项： A:Prices of bonds with lower durations are more sensitive to interest rate changes.; B:When a bond is trading at a discount, the price increase between coupons will exceed the drop when a coupon is paid, so the bond's price will rise and its discount will decline as time passes.; C:Coupon bonds may trade at a discount, at a premium, or at par.; D:The sensitivity of a bond's price changes in interest rates is the bond's duration.

10.Assume that a 10-year Treasury bond has a 12 percent annual coupon, while a 15-year Treasury bond has an 8 percent annual coupon. The yield curve is flat; all Treasury securities have a 10 percent yield to maturity. Which of the following statements is most correct? ( )选项： A:The 10-year bond is selling at a discount, while the 15-year bond is selling at a premium. B:The 10-year bond is selling at a premium, while the 15-year bond is selling at par. C:If interest rates decline, the price of both bonds will increase, but the 15-year bond will have a larger percentage increase in price. D:If the yield to maturity on both bonds remains at 10 percent over the next year, the price of the 10-year bond will increase, but the price of the 15-year bond will fall. E:Statements c and d are correct.

11.Assume a bond is currently selling at par value. What will happen if the bond's expected cash flows are discounted at a rate lower than the bond's coupon rate? () A: The price of the bond will increase. B: The coupon rate of the bond will increase. C: The par value of the bond will decrease. D: The coupon payments will be adjusted to the new discountrate.

12.A bond that is bought at a price below its face value and the face value is repaid at a maturity date is called a __. 选项： A、fixed-payment loan. B、simple loan. C、coupon bond. D、discount bond.

13.You are using key rate shifts to analyze the effect of yield changes on bond prices. Suppose that the 10 – year yield has increased by 10 basis points and that this shock decreases linearly to zero for the 20-year yield. What is the effect of this shock on the 14-year yield? 选项： A:Increase of 0 basis points B:Increase of 4 basis points C:Increase of 6 basis points D:Increase of 10 basis points

14.Which
of the following $1,000 face-value
securities has the highest yield to maturity?
A) 选项： A、5 percent coupon bond with a price of $600
B) B、5 percent coupon bond with a price of $800
C) C、5 percent coupon bond with a price of $1,000
D) D、5 percent coupon bond with a price of $1,200

15.An increase in the discount rate would cause: 选项： A: The money supply to increase and interest rates to fall . B: The money supply to decrease and interest rates to rise . C: The money supply to increase and interest rates to rise . D: The money supply to decrease and interest rates to fall .

16.A discount bond ( ).选项： A:is also called a zero-coupon bond. B:is bought at a price below its face value C:its face value is repaid at the maturity date. D:is also called simple payment bond.

17.The consumption function will shift upward if real asset and money holdings: 选项： A、increase, if people expect prices to increase, if interest rates decrease, and if taxes decrease. B、increase, if people expect prices to increase, if interest rates increase, and if taxes increase. C、increase, if people expect prices to increase, if interest rates increase, and if taxes decrease. D、decrease, if people expect prices to decrease, if interest rates decrease, and if taxes decrease.

18.The 6-month forward price of commodity X is USD 1,000. Six-month, risk-free, zero-coupon bonds with face value USD 1,000 trade in the fixed-income market. When taken in the correct amounts, which of the following strategies creates a synthetic long position in commodity X for a period of 6 months? 选项： A:Buy the forward contract and buy the zero-coupon bond. B:Buy the forward contract and short the zero-coupon bond. C:Short the forward contract and buy the zero-coupon bond. D:Short the forward contract and short the zero-coupon bond.

19. An increase in market supply and an increase in market demand will result in 选项： A、 A decrease in equilibrium price and an increase in equilibrium quantity B、 A decrease in equilibrium price - the change in equilibrium quantity is indeterminate C、 An increase in equilibrium quantity and the change in price is unclear D、 all of above

20.If a bond is issued at par and between interest dates:选项： A:The cash received by the corporation will be less than the face value of the bond.; B:The cash received by the corporation will be greater than the face value of the bond.; C:The cash received by the corporation will be the same as the face value of the bond.; D:Interest receivable will be debited.

21.If a bond's coupon rate is above its yield to maturity, the bond's price is 选项： A、less than its face value. B、greater than its face value. C、equal to its face value. D、equal to the coupon rate divided by the yield.