A corporate bond has a yield of 4.0 percent and a municipal bond has a yield of 3.0 percent. Which bond do you prefer if you are in the 28 percent tax bracket? A) Muni Bond B) Corporate Bond C) There is no difference between the bonds. Either bond offers the same after tax yield for the investor.
If a yield to maturity of a bond is less than its coupon rate, the market value of the bond will always be below its par value? A) True B) False
A bond carrying a 6% coupon rate that has a market price of $1,000 has a yield to maturity (YTM) that is... A) Greater than 6% B) Exactly 6% C) Less Than 6% D) Not enough information to determine YTM
A bond with a face value of $1,000 that is currently selling for more than $1,000 in the market is called a: A) Par Bond and the YTM < Coupon Rate B) Par Bond and the YTM > Coupon Rate C) Premium Bond and the YTM < Coupon Rate D) Premium Bond and the YTM > Coupon Rate E) Discount Bond and the YTM < Coupon Rate F) Discount Bond and the YTM > Coupon Rate
Holding everything else constant, which of the following would increase the YTM for a bond? (Select all that apply, if any) A) Making the bond callable. B) Making the bond have senior priority of payment status. C) Making the bond backed by collateral. D) Improving the credit rating of the bond. E) Making the bond's maturity date shorter.