general business data bank

| August 14, 2017

23. David Cone is concerned about the
interest rate changes for his fixed income investment. He looked at the
treasury yield curve on Wall Street Journal and observed a normal yield curve.
Based on this observation, which of the following statements is correct?

a.
Companies
must have more investment opportunities now than they expected to have in the
future
b.
Future
short-term interest rates are expected to be higher than current short-term
interest rates assuming the pure expectation theory holds.
c.
Maturity
risk premium is positive
d.
Inflation
must be expected to increase in the future
e.
Expectation
theory must be correct
24. A bond trader observes the following
information:

·
The
Treasury yield curve is downward sloping.
·
Empirical
data indicate that a positive maturity risk premium applies to both Treasury
and corporate bonds.
·
Empirical
data also indicate that there is no liquidity premium for Treasury securities
but that a positive liquidity premium is built into corporate bond yields.

On the basis of this
information, which of the following statements is most CORRECT?

a.
A
10-year corporate bond must have a higher yield than a 5-year Treasury bond.
b.
A
10-year Treasury bond must have a higher yield than a 10-year corporate bond.
c.
5-year corporate bond must have a higher yield
than a 10-year Treasury bond.
d.
The
corporate yield curve must be flat.
e.
Since
the Treasury yield curve is downward sloping, the corporate yield curve must
also be downward sloping.

25. If the current one year CD rate is 5% and the best estimate
of one year CD which will be available one year from today is 7%, what is the
current two year CD rate with 1% liquidity premium?

a. 5.0%
b. 5.5%
c. 6.0%
d. 6.5%
e. 7.0%
26. In
July 2009, Hungary successfully issued 1 billion euros in bonds. The
transaction was managed by Citigroup. Who is the issuer and what is the
category of bonds issued?

a.
Citigroup, Corporate
bonds
b.
The bank of Budapest, Municipal bonds
c.
The Hungarian government, Foreign government bonds
d.
The New York Citibank, Sinking bonds
e.
The Hungarian government, T-bonds

27. Roen
is planning to invest in five-year 15% annual coupon bonds with a face value of
$1,000 each. Calculate number to fill the blanks in the table and identify
which one is the premium bond if the market is at equilibrium.

Bond

Discount Rate

Bond Value

Current Yield

Bond A

(1)

$1,189.54

12.61%

Bond B

15.00%

(2)

15.00%

Bond C

16.40%

$954.58

(3)

a.
9.00%, $988.76, 14.47%,
bond A
b.
10.00%,
$1,000.00, 15.71%, bond A
c.
11.00%,
$1,100.00, 15.92%, bond B
d.
12.24%, $1,000.00, 16.00%,
bond B
e.
10.00%, $1,250.00, 16.12%,
bond C
28. Assume
that a $1 million par value, semiannual coupon U.S. Treasury note with five
years to maturity has a coupon rate of 6%. The YTM of the bond is 11.00%. What
is the value of the T-note?

a.
$511,282.39
b.
$689,825.45
c.
$973,871.22
d.
$811,559.35
e.
$987,654.32
29. Duff Brewing Co. has 9% annual coupon
bonds that are callable and have 18 years left until maturity. The bonds have a
par value of $1,000 and their current market price is $1,190.35. However, Duff
Brewing Co. may call the bonds in 8 years at a call price of $1,060. What are
the YTM and YTC, respectively? Also, if Duff Brewing Co. issues new bonds
today, what coupon rate must the bonds to be issued at par?

YTM YTC Coupon Rate
a.
6.09%, 5.47%, 6.09%
b.
7.09%, 6.47%, 7.09%
c.
8.09%, 7.47%, 7.47%
d.
8.92%, 8.82%, 8.82%
e.
9.23%, 9.32%, 9.32%

.

30. The following bond list is from the
business section of a newspaper on January 1, 2005 (all are semi-annual bonds).
Prices are stated relative to the par value of $100. Calculate what number
should be in the blank and indicate which bond is not trading at discount.

Company

Coupon

Maturity

Last Price

Last Yield

EST
Spread

UST
(Years)

EST
Volume
(1000s)

Schubert, Inc.

8.125%

01-01-2015

$82.25

11.11%

6.20

10

72,070

Chapman, Inc.

9.625%

01-01-2035

$80.48

12.05%

7.15

30

65,275

Rust, Inc.

4.500%

01-01-2010

5.62%

1.37

5

59,277

Murphy & Co.

5.375%

01-01-2010

$101.02

5.14%

0.89

5

57,465

Pickman, Inc.

7.750%

01-01-

2015

$93.11

8.80%

3.89

10

56,305

Last Price & Last Yield:
bond’s price and YTM at the end of trading.
EST Spread: bond’s spread above
the relevant U.S. Treasury benchmark (percentage).
UST: relevant maturity of U.S.
Treasury benchmark for each bond.
EST Volume: # of bonds traded
during the day.

a.
$88.27, Rust, Inc.
b.
$95.23, Murhpy & Co.
c.
$95.18, Murhpy & Co.
d.
$100.40, Pickman, Inc.
e.
$102.80, Schubert, Inc.

Order your essay today and save 30% with the discount code: ESSAYHELPOrder Now