FIN 501 Lecture Notes - Current Yield, Premium Bond, Market Price
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Student: ___________________________________________________________________________
1. Which one of the following is the correct definition of a coupon rate
A. semi-annual interest payment/par value
B. annual interest/par value
C. annual interest/market value
D. semi-annual coupon/bond price
E. annual coupon/bond price
2. The most common type of bond which obligates its issuer to pay a fixed sum of money at a future maturity
date, plus periodic interest payments is referred to as a:
A. pure bond
B. premium bond
C. government bond
D. straight bond
E. conversion bond
3. The annual interest on a bond divided by the bond's value is the
A. coupon rate
B. current yield
C. yield to maturity
D. realized yield
E. par yield
4. A bond's annual interest payment divided by its market price is the bond's ________.
A. coupon rate
B. current yield
C. yield to maturity
D. realized yield
E. par yield
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5. The ________ is the discount rate that equates a bond's price with the present value of its cash flows. Such a
rate shows the promised return on a bond.
A. coupon rate
B. current yield
C. yield to maturity
D. realized yield
E. par yield
6. A discount bond is a bond that
A. Is guaranteed by the Bank of Canada
B. Is Callable
C. Is selling above par
D. Has a high credit rating
E. Has a face value exceeding the market value
7. A premium bond is a bond that
A. Is guaranteed by the Bank of Canada
B. Is Callable
C. Is selling above par
D. Has a high credit rating
E. Has a face value exceeding the market value
8. A(n) ______ bond has a market price that is less than par value.
A. Undervalued
B. Discount
C. Par
D. Premium
E. Callable
9. A(n) ______ bond has a market price that is greater than par value.
A. Undervalued
B. Discount
C. Par
D. Premium
E. Callable
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10. The quoted price that excludes any accrued interest is called the
A. Dirty price
B. Par value
C. Clean price
D. Maturity value
E. Discount value
11. The dirty price of a bond is the
A. Market price excluding any accrued interest
B. Quoted bid price
C. Issue price
D. Previous day's market price
E. Amount you actually pay
12. A callable bond.
A. Can be redeemed by the issuer prior to maturity
B. Can be exchanged for shares of common stock
C. Can have its maturity date extended by the issuer
D. Is a bond that pays no regular interest payments
E. Can be redeemed at the discretion of the bondholder
13. The price paid to redeem a bond prior to maturity is the
A. market price
B. deferred price
C. redemption value
D. call price
E. par value
14. The ________ prevents the issuer from redeeming the bond.
A. Silent period
B. Call protection period
C. Call resolution restriction
D. Deferral provision
E. Vesting period
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