Question

4.Which one of the following statements about the approach to bond pricing is NOT true?

Select one:

A. To calculate a bond's price, one needs to calculate the present value of the bond's expected cash flows.

B. The value, or price, of any asset is the future value of its cash flows.

6.Which one of the following statements is NOT true?

Select one:

A. The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments equal to the price of the bond.

B. It is the yield that the investor earns if the bond is held to maturity, and all the coupon and principal payments are made as promised.

C. A bond's yield to maturity will not change as interest rates increase or decrease.

D. If the bond is priced at par, its yield to maturity is the same as its coupon rate.

C. The required rate of return, or discount rate, for a bond is the market interest rate called the bond's yield to maturity

D. In the price equation, include as the expected future cash flows the coupons that the bond will pay and the maturity value to be received.

7.Bonds sell at a premium to the par value when market yield to maturity for the bond is:

Select one:

A. less than the bond's coupon rate.

B. greater than the bond's coupon rate.

C. equal to the bond's coupon rate.

D. Market rates are irrelevant in determining a bond's price.

9.Zero coupon bonds sell well below their face value because

Select one:

A. They are high risk

B. They don't offer any collateral

C. They don't pay coupons

D. Regulators have banned them.

Answer 1

Q 4 )

Answer - The correct choice is B. It is not true
The value, or price, of any asset is the present value not the future value of its cash flows.
Option A is True

Q 6)

Answer- The option C is not True.  The bond's yield to maturity changes daily as interest rates increase or decrease.

All other options are Correct.

Q 7)

Answer- The correct choice is A.
If a bonds coupon rate is more than its YTM, then the bond is selling at a premium and if the bond's coupon rate is less than it's YTM then the bond is selling at a discount.

The other options B,C and D are incorrect.

Q 9)

Answer- The correct Option is C. The Zero coupon bonds sell well below their face value at a discount because they don't pay coupons.

The other options A,B and D is incorrect.