You own a bond that has a face value of $1,000 and a conversion ratio of 26. You have just received notification that the bond is being called at a premium of $40. The stock price is $41.20 a share. You should _____ your bond because the conversion value is _____.

76.    You own a bond that has a face value of $1,000 and a conversion ratio of 26. You have just received notification that the bond is being called at a premium of $40. The stock price is $41.20 a share. You should _____ your bond because the conversion value is _____.

 

A.     convert; less than the call price by $40.00

B.     convert; greater than the call price by $31.20

C.     convert; greater than the call price by $4.75

D.     not convert; less than the call price by $31.20

E.     not convert; greater than the call price by $40.00

Answer

Conversion value = 26 × $41.20 = $1,071.20
Call price = $1,000 + $40 = $1,040
Difference = $1,071.20 - $1,040 = -$31.20
You should convert your bond because the conversion value is $31.20 greater than the call price.

 

77.    Slater Mines just called its outstanding bonds at a call price of $1,025. The bonds have a conversion price of $33.33 and a par value of $1,000. The stock price is currently $33.10. In response to this call, the bondholders should _____ because _____.

 

A.     accept the call; the call price exceeds the conversion value

B.     accept the call; they have no other choice

C.     convert their bonds; the conversion price exceeds the par value by $37.90

D.     convert their bonds; the conversion price exceeds the call price by $12.90

E.     elect to continue holding their bonds; they want to continue receiving the interest payments

Answer

Conversion value = ($1,000/$33.33) × $33.10 = $993.10
The call price of $1,025 exceeds the conversion value of $993.10.
Bondholders should redeem their bonds at the call price because that price exceeds the conversion value.

 

78.    A Treasury bond has a face value of $25,000 and a quoted price of 102:20. What is the bond's dollar price?

 

A.     $25,002.80

B.     $25,102.18

C.     $25,656.25

D.     $25,787.50

E.     $31,475.00

Answer

Price = $25,000 × 102 and 20/32nds percent = $25,000 × 1.02625 = $25,656.25
 

79.    A Treasury bond has a quoted bid price of 100:10 and a quoted ask price of 100:11. What is the amount you will receive if you sell your bond that has a par value of $20,000?

 

A.     $20,016.00

B.     $20,050.00

C.     $20,062.60

D.     $20,100.08

E.     $21,600.00

 

80.    A Treasury bond has a yield to maturity of 5.2 percent, a time to maturity of 8 years, and a coupon rate of 7 percent. What is the bond price?

 

A.     $940.65

B.     $946.95

C.     $1,054.55

D.     $1,116.59

E.     $1,169.56

 

81.    A Treasury bond has a dollar price of $1,015.63. What would you expect the bond quote to be?

 

A.     101:05

B.     101:15

C.     101:16

D.     101:18

E.     101:22

 

82.    A Treasury note has 3.5 years left to maturity, a yield to maturity of 4.25 percent, and a coupon rate of 4.40 percent. What is the price of the bond?

 

A.     $1,004.83

B.     $1,005.53

C.     $1,006.56

D.     $1,007.58

E.     $1,008.96

 

83.    A Treasury bond matures in 13 years, has a 5.25 percent coupon, and a quoted price of 98:01. What is the yield to maturity?

 

A.     5.25 percent

B.     5.34 percent

C.     5.46 percent

D.     5.55 percent

E.     5.68 percent

 

84.    A Treasury bond has a 3.4 percent coupon, a quoted price of 101:06, and 9 years to maturity. What is the yield to maturity?

 

A.     3.25 percent

B.     3.93 percent

C.     4.03 percent

D.     4.90 percent

E.     5.92 percent

 

85.    A STRIPS matures in 6 years, has a face value of $17,000, and has a yield to maturity of 4.8 percent. What is the price?

 

A.     $10,854.59

B.     $11,010.43

C.     $11,284.75

D.     $11,322.01

E.     $12,789.38

 

86.    A STRIPS has a yield to maturity of 6.2 percent, a par value of $25,000, and a time to maturity of 10 years. What is the price?

 

A.     $4,100.87

B.     $5,792.80

C.     $9,967.50

D.     $10,698.08

E.     $13,575.84

 

87.    A STRIPS has a $9,000 par value and a market value of $7,050. The time to maturity is 5 years. What is the yield to maturity?

 

A.     2.07 percent

B.     3.00 percent

C.     4.94 percent

D.     5.00 percent

E.     5.07 percent

 

88.    A STRIPS that matures in 8 years is selling for $11,490. The par value is $15,000. What is the yield to maturity?

 

A.     3.36 percent

B.     4.67 percent

C.     5.25 percent

D.     6.54 percent

E.     6.75 percent

 

89.    You own a principal STRIPS which is based on a 4.5 percent coupon Treasury bond that matures in 20 years. The STRIPS is priced at $22,868 and has a par value of $50,000. What is the yield to maturity on the STRIPS?

 

A.     3.79 percent

B.     3.90 percent

C.     3.93 percent

D.     3.95 percent

E.     3.99 percent

 

90.    The Federal Reserve is offering Treasury bills with a par value of $25 billion for sale. They have received $7 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are: (Qty in billions)

  

What price will Bidder A pay per bond, assuming that bid is accepted?

 

A.     $9,600

B.     $9,650

C.     $9,675

D.     $9,700

E.     $9,750

 

                                        

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