The price a dealer is willing to accept for selling a security to an investor is called the:
A) Equilibrium price.
B) Auction price.
C) Bid price.
D) Ask price.
E) Bid-ask spread.
12. A bond with a face value of $1,000 has annual coupon payments of $100 and was issued 10 years ago. The bond currently sells for $1,000 and has 8 years remaining to maturity. This bond's ______________ must be 10%.
I. yield to maturity
II. market premium
III. coupon rate
A) I only
B) I and II only
C) III only
D) I and III only
E) I, II and III
13. If you divide a bond's annual coupon payment by its current yield you get the ___________.
A) yield to maturity
B) investors' required rate of return
C) annual coupon rate
D) cost of capital
E) bond price
14. Which of the following statements regarding bond pricing is true?
A) The lower the discount rate, the more valuable the coupon payments are today.
B) Bonds with high coupon payments are generally (all else the same) more sensitive to changes in interest rates than bonds with lower coupon payments.
C) When market interest rates rise, bond prices will also rise, all else the same.
D) Bonds with short maturities are generally (all else the same) more sensitive to changes in interest rates than bonds with longer maturities.
E) All else the same, bonds with larger coupon payments will have a lower price today.
15. Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per year and a face value of $1000. If the yield to maturity on similar bonds is 8%, this bond should:
A) Sell for the same price as the similar bond regardless of their respective maturities.
B) Sell at a premium.
C) Sell at a discount.
D) Sell for either a premium or a discount but it's impossible to tell which.
E) Sell for par value.