1. Which one of the following bonds is the most interest rate sensitive?
10-year, 5% coupon rate bond
10-year, 2% coupon rate bond
5-year, 5% coupon rate bond
5-year, 2% coupon rate bond
2. The high-yield bond is more likely to have a higher default risk.
True
False
3. The current yield on a bond is equal to the annual interest divided by which one of the following?
Issue price
Face amount
Current market price
Current par value
4. If a bond’s current yield exceeds its coupon rate, the bond is selling at:
a discount.
par.
a premium.
5. A bond has a face value of $1,000, a market price of $1,112, and pays $81 in interest every year. What is the coupon rate?
4.05%
4.50%
8.10%
9.00%