1) When Coca-Cola issues more stock, it’s called an IPO.a. Trueb. Flase2) An IPO is a ________ market transaction.a. Primaryb. Secondaryc. Futuresd. Insurance3) According to the efficient market hypothesis, a market where prices reflect all publicly available information is:a. Weak-form efficientb. Semistrong-form efficientc. Strong-form efficient4) The interest rate on a long term Treasury Bill is affected by an inflation premium and a _______ premium.a. Default risk premiumb. Liquidity premiumc. Maturity risk premium5) A long-term corporate bond is currently yielding 8%. The inflation premium is 1.5%, the liquidity premium is 0.5%, the maturity risk premium is 2%, and the default risk premium is 2.5%. What is the real risk-free rate of return (r*)?a. 1.5%b. 2%c. 1%d. 2.5%6) One year Treasury securities yield 6%. The market anticipates 1 year from now, 1-year Treasury securities will yield 8%. If the Pure Expectations Hypothesis is correct, what is the yield today on 2-year Treasury securities?a. 6%b. 6.5%c. 7%d. 7.5%e. 8%7) A putable bonda. Can be exchanged for common stock.b. Allows the company to pay back the bond early.c. Allows the bondholder to sell the bond to another investor.d. Allows the holder to sell the bond back to the company before it matures.Use the following information for questions 8 and 9:A company sells a 10 year, 5% coupon, $1000 par bond for $975. The bond is callable in 5 years at 105.8) What is the YTM?a. 5%b. 5.33%c. 5.61%d. 5.79%9) What is the yield to call?a. 5.33%b. 6.11%c. 6.48%d. 6.82%10) What is the coupon rate on a 5 year, annual coupon bond that’s selling for $939.31if the rd=7.5%?a. 5%b. 6%c. 7.5%d. 60%11) What is the value of a 15 year, 8% semiannual coupon bond if the market interest rate is 9%?a. $1,000b. $918.56c. $947.88d. $1,016.6612) What is the current yield on the bond from #11?a. 4.5%b. 9.92%c. 8%d. 8.71%Solutions:1) b2) a3) b4) c5) a6) c7) d8) b9) c10) b11) b12)
View Full Document
Unlocking...