Home / Questions / The following multiple-choice problems are based on questions that appeared in past CFA ex...
The following multiple-choice problems are based on questions that appeared in past CFA examinations.
A bond with a call feature: (LO 10-4)
Is attractive because the immediate receipt of principal plus premium produces a high return.
Is more apt to be called when interest rates are high because the interest saving will be greater.
Will usually have a higher yield to maturity than a similar noncallable bond.
None of the above.
In which one of the following cases is the bond selling at a discount? (LO 10-2)
Coupon rate is greater than current yield, which is greater than yield to maturity.
Coupon rate, current yield, and yield to maturity are all the same.
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Coupon rate is less than current yield, which is less than yield to maturity.
Coupon rate is less than current yield, which is greater than yield to maturity.
Consider a five-year bond with a 10% coupon selling at a yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be: (LO 10-3)
Higher
Lower
The same
Par
Which of the following statements is true ? (LO 10-7)
The expectations hypothesis indicates a flat yield curve if anticipated future short- term rates exceed current short-term rates.
The basic conclusion of the expectations hypothesis is that the long-term rate is equal to the anticipated short-term rate.
The liquidity hypothesis indicates that, all other things being equal, longer maturi- ties will have higher yields.
The liquidity preference theory states that a rising yield curve necessarily implies that the market anticipates increases in interest rates.
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