1. When the market value of debt is the same as its face value, it is said to be selling at the:
discounted value.
maturity value.
par value.
yield value.
2. Devine Divots issued a bond a few years ago. The bond has a face value equal to $1,000 and pays investors $30 interest every six months. The bond has eight years remaining until maturity. If an investor requires a 7 percent rate of return to invest in this bond, what is the maximum price the investor should be willing to pay to purchase the bond? (Round the answer to two decimal places.)
$940.29
$1,062.81
$965.63
$939.53
3. A listing of all possible outcomes, or events, with a chance of occurrence assigned to each is called a probability distribution.
False
True
4. Tony's Pizzeria plans to issue bonds with a par value of $1,000 and 10 years to maturity. These bonds will pay $45 interest every 6 months. Current market conditions are such that the bonds will be sold at net $937.79. What is the yield to maturity (YTM) of the issue as a broker would quote it to an investor? (Round the answer to the nearest whole number.)
9%
11%
8%
10%
5. The beta coefficient of Zed Corporation is equal to 0.7 and the required rate of return on the stock equals 12 percent. If the expected return on the market is 12.5 percent, what is the risk-free rate of return? (Round off the answer to two decimal places.)
10.83%
8.89%
12.25%
9.52%