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FIN 390 Week 6 Quiz Answers
- (TCO 7) What is the primary risk that a bondholder faces?
- (TCO 7) To calculate a bond’s duration, you must
- (TCO 7) Cash flow matching isn’t the ideal solution to reduce bond portfolio interest rate risk because
- (TCO 7) Why do investors like convexity?
- (TCO 7) Passive bond managers prefer to
- (TCO 9) Which of the following possible provisions of a bond indenture is designed to ease the burden of principal repayment by spreading it out over several years?
- (TCO 9) Bonds issued in the United States are _____, and most bonds issued overseas are
- (TCO 9) A convertible bond has a par value of $1,000 but its current market price is $950. The current price of the issuing company’s stock is $19, and the conversion ratio is 40 shares. The bond’s conversion premium is
- (TCO 7) Bond portfolio immunization techniques balance _____ and
_____ risk fin 390 week 6 quiz - (TCO 5) A perpetuity pays $100 each and every year forever. The duration of this perpetuity will be _____ if its yield is 9%.
- (TCO 7) A company has current assets of: cash $500, accounts receivable $200, and inventory $400. The company also has current liabilities of: accounts payable $300 and notes payable $600. What is the company’s quick ratio?
- (TCO 7) You earn 6% on your corporate bond portfolio this year, and you are in a 25% federal tax bracket and an 8% state tax bracket. Your after tax return is _____. (Assume that federal taxes are not deductible against state taxes and vice versa.)
