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Canadian Securities Course (CSC) Bond Valuation — practice questions

Explore 30 free Bond Valuation questions in Canadian Securities Course (CSC) Finance. Open each question or exercise to read its content, reference answers and available explanation.

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Bond Valuation questions and exercises with answers

Showing questions 1–30 of 30.

A bond certificate states the amount the issuer will repay at the end of the term. That stated amount is the:Read the answer and worked solution →A bond pays 6 percent on a 1,000 face value, giving 60 a year. The 6 percent figure is the:Read the answer and worked solution →An investor discounts every future payment back to today to value a bond. The rate used for that is the:Read the answer and worked solution →A bond's coupon rate is 4 percent while comparable yields are 6 percent. The bond will trade:Read the answer and worked solution →Another bond pays 8 percent while comparable yields are 6 percent. That bond will trade:Read the answer and worked solution →Interest rates in the market rise sharply. The prices of existing bonds will:Read the answer and worked solution →That relationship between a bond's price and its yield is described as:Read the answer and worked solution →Some corporate bonds make no periodic interest payments at all. Those are:Read the answer and worked solution →A company reserves the right to redeem its bonds before the maturity date. Such bonds are described as:Read the answer and worked solution →A bond rated BBB by S&P or Baa by Moody's or better is classed as:Read the answer and worked solution →A bond rated below that line pays more but carries more risk. It is called a high-yield or:Read the answer and worked solution →Those lower-rated bonds are the highest paying because they are also the highest:Read the answer and worked solution →Credit rating agencies cut Enron's bonds to junk status in 2001, showing that the rating system is:Read the answer and worked solution →Two bonds are identical except that one runs for thirty years and one for two. The longer bond carries more:Read the answer and worked solution →The danger that an issuer simply fails to pay what it owes is called:Read the answer and worked solution →A bond paying 50 a year with a face value of 1,000 has a coupon rate of:Read the answer and worked solution →A 1,000 par bond with a 7 percent coupon pays each year:Read the answer and worked solution →At maturity, the issuer of a plain bond hands the holder the final coupon and the:Read the answer and worked solution →An investor buying a zero-coupon bond makes money because it is purchased:Read the answer and worked solution →When a bond's coupon rate exactly equals its yield to maturity, the bond trades:Read the answer and worked solution →A rating agency's job is to give investors an indication of the likelihood of:Read the answer and worked solution →A company issues callable bonds and market rates then fall sharply. The issuer is likely to:Read the answer and worked solution →Catch the bond featuresRead the answer and worked solution →Pop the bond risksRead the answer and worked solution →Run the bond gatesRead the answer and worked solution →Slice the bond wordsRead the answer and worked solution →Discount or premiumRead the answer and worked solution →Sort the bond wordsRead the answer and worked solution →Type the numberRead the answer and worked solution →Bonds bingoRead the answer and worked solution →

Worked practice questions

A bond certificate states the amount the issuer will repay at the end of the term. That stated amount is the:

  1. Par value
  2. Pay ratio
  3. Price index
  4. Profit share
Show answer and solution

Correct answer: A. Par value

1. The figure is printed on the bond itself. 2. It is what the holder gets back at maturity. 3. That amount is the par value, also called face value. _Source: OpenStax Principles of Finance 2e, Chapter 10, Bonds and Bond Valuation._

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A bond pays 6 percent on a 1,000 face value, giving 60 a year. The 6 percent figure is the:

  1. Currency rate
  2. Coupon rate
  3. Capital gain
  4. Credit score
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Correct answer: B. Coupon rate

1. The rate is applied to the face value to size the payment. 2. Six percent of 1,000 is exactly the 60 paid each year. 3. That rate is the coupon rate. _Source: OpenStax Principles of Finance 2e, Chapter 10, Bonds and Bond Valuation._

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An investor discounts every future payment back to today to value a bond. The rate used for that is the:

  1. Yield to maturity
  2. Yearly turnover
  3. Yield of dividends
  4. Year end rate
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Correct answer: A. Yield to maturity

1. Coupons and the final repayment are future cash flows. 2. One rate brings all of them into present value terms. 3. That rate is the yield to maturity. _Source: OpenStax Principles of Finance 2e, Chapter 10, Bonds and Bond Valuation._

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