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FMI Quiz 3

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26 views3 pages

FMI Quiz 3

xx

Uploaded by

Shrutika Ruia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Indian Institute of Management Kozhikode

FMI - Quiz 3
Name:
Roll No:
Section:
Instructions:
a. Answer all the questions. Max time available: 30 mts
b. Return this paper for grading. Papers without Name and roll number details will
not be graded.
c. Give your answers only in the Table below. Only the answers given in the Table will be
considered for grading. Each question carries 1 mark.
d. Only correct, legible and clear answers will be considered.
e. You can carry only the RECOMMENDED Textbook.
f. You may use Excel or a financial calculator.
g. Usage of internet, mobile, private networking, tethering of laptops, usage of blue tooth
etc., will be considered as a malpractice.
h. No need to upload the Excel workings/rough sheets etc.,
i. Exchange of textbooks, calculators, laptops etc., during the quiz will be considered as a
malpractice.

Answers
1 2 3 4 5 6 7 8 9 10 11 12

B C D D B E B C C A/ C B
E

Questions
01)The principal amount of a bond that is repaid at the end of the loan term is called the bond's:

A. coupon.
B. face value.
C. maturity.
D. yield to maturity.
E. coupon rate.

02) The zero coupon bonds of MarkCo, Inc. have a market price of $394.47, a face value of $1,000, and a
yield to maturity of 6.87%. How many years is it until this bond matures?
A. 7 years
B. 10 years
C. 14 years
D. 18 years

1
E. 21 years

03) A bond with a 6% annual coupon that pays interest semi-annually and is priced at par will have a
market price of _____ and interest payments in the amount of _____ each.

A. $1,006; $60
B. $1,060; $30
C. $1,060; $60
D. $1,000; $30
E. $1,000; $60

04) All else constant, a coupon bond that is selling at a premium, must have:

A. a coupon rate that is equal to the yield to maturity.


B. a market price that is less than par value.
C. semi-annual interest payments.
D. a yield to maturity that is less than the coupon rate.
E. a coupon rate that is less than the yield to maturity.

05) A bond with semi-annual interest payments, all else equal, would be priced _________ than one with
annual interest payments.

A. higher
B. lower
C. the same
D. it is impossible to tell
E. either higher or the same

06) The yield to maturity is:

A. the rate that equates the price of the bond with the discounted cash flows.
B. the expected rate to be earned if held to maturity.
C. the rate that is used to determine the market price of the bond.
D. equal to the current yield for bonds priced at par.
E. All of these.

07) A 12-year, 5% coupon bond pays interest annually. The bond has a face value of $1,000. What is the
change in the price of this bond if the market yield rises to 6% from the current yield of 4.5%?

A. 11.11% decrease
B. 12.38% decrease
C. 12.38% increase
D. 14.13% decrease
E. 14.13% increase

8) Which of the following two bonds is more price sensitive to changes in interest rates?
1) A par value bond, X, with a 5-year-to-maturity and a 10% coupon rate.
2) A zero-coupon bond, Y, with a 5-year-to-maturity and a 10% yield-to-maturity.

A. Bond X because of the higher yield to maturity.


B. Bond X because of the longer time to maturity.
C. Bond Y because of the longer duration.

2
D. Both have the same sensitivity because both have the same yield to maturity.
E. None of the above

9) Holding other factors constant, which one of the following bonds has the smallest price volatility?

A. 5-year, 0% coupon bond


B. 5-year, 12% coupon bond
C. 5 year, 14% coupon bond
D. 5-year, 10% coupon bond
E. Cannot tell from the information given.

10) Bond XYZ with par value Rs 1000 has a modified duration of 6. Which one of the following
statements regarding the bond is true?

A. If the market yield increases by 1% the bond's price will decrease by $60.
B. If the market yield increases by 1% the bond's price will increase by $50.
C. If the market yield increases by 1% the bond's price will decrease by $50.
D. If the market yield increases by 1% the bond's price will increase by $60.
E. None of the above.

11) An 8%, 30-year corporate bond was recently being priced to yield 10%. The Macaulay duration for
the bond is 10.20 years. Given this information, the bond's modified duration would be ________.

A. 8.05
B. 9.44
C. 9.27
D. 11.22
E. none of the above

12) A 7%, 14-year bond has a yield to maturity of 6% and duration of 7 years. If the market yield changes
by 44 basis points, how much change will there be in the bond's price?

A. 1.85%
B. 2.91%
C. 3.27%
D. 6.44%
E. none of the above

*********

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