Tuesday, November 12, 2019

Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually

Which two of the following factors cause the yields on a corporate bond to differ from those on a comparable Treasury security?

I. inflation risk
II. interest rate risk
III. taxability
IV. default risk 
 
A. 
I and II only

B. 
III and IV only

C. 
I, II, and IV only

D. 
II, III, and IV only

E. 
I, II, III, and IV
Refer to sections 7.4 and 7.7

80.
The bonds issued by Stainless Tubs bear an 8 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $952. What is the yield to maturity? 
 
A. 
7.87 percent

B. 
7.92 percent

C. 
8.08 percent

D. 
8.69 percent

E. 
9.20 percent


 

This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct.

 


81.
Greenbrier Industrial Products' bonds have a 7.60 percent coupon and pay interest annually. The face value is $1,000 and the current market price is $1,062.50 per bond. The bonds mature in 16 years. What is the yield to maturity? 
 
A. 
6.94 percent

B. 
7.22 percent

C. 
7.46 percent

D. 
7.71 percent

E. 
7.80 percent


 

This cannot be solved directly, so it's easiest to just use the calculator method to get an answer. You can then use the calculator answer as the rate in the formula just to verify that your answer is correct.

 

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