CH5. Bonds Flashcards by sinuka sinuko

For an 8% bond with a par value of $1000 and a market value of $1,200, what is the current yield?
(a) 6.67%
(b) 8.00%
(c) 12.00%
(d) 14.67%
(e) 28.00%

(a) 6.67%

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What is the price for a six-month (182-day) U,S, T-bill with a simple discount yield of 4%?
(a) 95.84
(b) 96.98
(c) 97.84
(d) 97.98
(e) 98.84

(d) 97.98

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Consider a 5% bond paying semi-annual coupons. There are 3 coupons remaining. The market rate is 8%. There are 76 days between settlement and the next coupon date and 184 days in the coupon payment period. What is the dirty price of the bond?
(a) $95.83
(b) $98.07
(c) $102.35
(d) $102.07
(e) $104.87

(a) $95.83

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What would be the accrued interest for a 5% $1,000 bond settled on July 15th with payable dates of April 15th and October 15th?
(a) $10.00
(b) $12.50
(c) $25.00
(d) $50.00

(b) $12.50

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What is the price for a six-month (182-day) T-bill with a discount yield of 3%?
(a) 97.48
(b) 98.24
(c) 98.48
(d) 98.54

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If the yield on T-bills is 4% and it increases by 10 basis points, what is the new yield?
(a) 4.01%
(b) 4.10%
(c) 4.40%
(d) 5.00%
(e) 5.10%

(b) 4.10%

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For an 8% bond with a par value of $1000 and a market value of $1,200, what is the nominal yield?
(a) 4.00%
(b) 6.00%
(c) 6.67%
(d) 8.00%

(d) 8.00%

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For an 8% ten-year corporate bond with a par value of $1,000 purchased at $1,200, what is the current or effective yield?
(a) 4.00%
(b) 5.45%
(c) 6.67%
(d) 8.00%

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What is the approximate yield to maturity for a 7%, $1,000 bond purchased for $1,150 and maturing in six years?
(a) 3.64%
(b) 4.20%
(c) 6.67%
(d) 7.00%
(e) 6.44%

(b) 4.20%

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What is the price for a three-month (91-day) U.S. T-bill with a discount yield of 6%?
(a) 97.48
(b) 98.24
(c) 98.48
(d) 99.24
(e) 99.48

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What is the simple discount yield for a three month (91-day) U.S. T-bill selling at 98.48?
(a) 4%
(b) 5%
(c) 6%
(d) 7%
(e) 8%

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If the yield on T-bills is 4% and it increases by 100 basis points, what is the new yield?
(a) 4.01%
(b) 4.04%
(c) 4.10%
(d) 5.00%
(e) 5.04%

(d) 5.00%

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What is the principal investment in an ROP bond if the coupon interest is US$3,281.25 every 6 months and the coupon rate is 8.75%?

(a) $ 50,000
(b) $ 60,000
(c) $ 65,000
(d) $ 75,000
(e) $ 80,000

(d) $ 75,000

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How much would be paid in principal and interest over the lifetime of a 20-year 4% bond with a par value of $1,000?
(a) $800
(b) $1,400
(c) $1,800
(d) $2,000

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What are the proceeds from the sale of 1,000 shares of mutual fund at $12 with a 2% sales charge and 0.75% redemption fee?
(a) $11,670
(b) $11,760
(c) $11,910
(d) $12,000

(a) $11,670

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What is the return before interest and commissions after buying XYZ on $100 at 50% margin then selling at $150?
(a) 50%
(b) 75%
(c) 100%
(d) 200%

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For a 6% ten-year corporate bond with a par value of $1000 purchased at $800, what is the approximate yield to maturity?
(a) 6.00%
(b) 7.50%
(c) 8.89%
(d) 10.00%

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What is the equivalent taxable bond yield for an 8% tax exempt bond for an investor in the 28% tax bracket?
(a) 5.76%
(b) 6.25%
(c) 10.24%
(d) 11.11%

(d) 11.11%

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What is the bond equivalent yield for a three-month (91-day) $1,000 U.S. T-bill selling at $989.64?
(a) 4.0%
(b) 4.2%
(c) 4.4%
(d) 5.0%

(b) 4.2%

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For a 6% ten-year corporate bond with a par value of $1,000 purchased at $1,080, what is the approximate yield to maturity?
(a) 4%
(b) 5%
(c) 6%
(d) 8%

(b) 5%

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For a 6% ten-year corporate bond with a par value of $1000 purchased at $800, what is the current or effective yield?
(a) 6.00%
(b) 7.50%
(c) 8.89%
(d) 10.00%

(b) 7.50%

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What is the capital gain on a $1,000 bond issued at $800 sold for $950 after $50 of the original issue discount had accrued?
(a) $25
(b) $50
(c) $75
(d) $100

(d) $100

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What is the approximate yield to maturity for a 7%, $1,000 bond purchased for $800 and maturing in ten years?
(a) 7%
(b) 8%
(c) 9%
(d) 10%

(d) 10%

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How many months interest are paid for a bond issued January 1, 2007 and the first coupon April 1, 2007?
(a) 1 month
(b) 2 months
(c) 3 months
(d) 6 months

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What is the coupon rate of the USD50K ROP bond if the coupon payment is USD1,937.50 every 6 months? (a) 5.75% (b) 6.75% (c) 7.75% (d) 8.75% (e) 9%

If you invest $500 at the end of the first year, $500 at the end of the second year, withdraw $200 at the end of the third year, and invest another $500 at the end of the fourth year. How much will you have accumulated at the end of the fourth year? Your investment rate is 10%. (a) $955.00 (b) $1,050.00 (c) $1,550.50 (d) $1,990.50

(a) 95.83

A customer purchases 10 bonds that have a nominal yield of 8% p.a. at a price of 94 1/4. The customer will receive semi annual payments of: (a) $377 (b) $400 (c) $754 (d) $800

(b) $400

Mr. Reyes calls up and asks why the maturity value of his RTB booking is less than what he invested. What will you tell the client? The Bond was issued last August 1, 2007 and he bought the security on August 1, 2008. (a) He bought the security at a premium so he paid more because of the accrued interest and the cost of the Bond. (b) He bought the security at a premium thereby paying only for the cost of the bond. (c) He bought the security at par and has to pay for the custody fees (d) He bought the security at a discount and has to pay for the commission

(b) He bought the security at a premium thereby paying only for the cost of the bond.

XYZ Corporation inquires: how much are you paying for a 3 year bond with a par value of Php 2,421,000. The current market bid is at 5% and offer is at 4.5%. You inform the client that: (a) Under the OTC trading procedures, you can only accept Php 2,000,000 in face value (b) You can pay at 5% (c) Under the new trading procedures, you can only accept a face value in increments of 10K (d) Your asking yield is 4.75% (e) BandC

(b) You can pay at 5%

The client’s money out in ROP is computed as: (a) Sum of face amount plus the total accrued interest on maturity (b) Face amount multiplied by price (c) Principal plus accrued interest (d) Principal multiplied by price (e) Client’s total money in plus client’s gain

FXTNs, the client’s money out is computed as: (a) Net price plus the summation of all coupon interest (b) Face value less accrued interest (c) Face value multiplied by the gross price (d) Net price less gross price (e) Present value of the maturity value plus the present value of the c coupon amount, plus accrued interest if applicable

(e) Present value of the maturity value plus the present value of the c coupon amount, plus accrued interest if applicable

In Bond computation, accrued term means: (a) The number of days from settlement date to the next coupon date (b) The number of days from issue date to the next coupon date (c) The number of days from issue date to settlement date (d) The number of days from the last coupon date to settlement date (e) The number of days from settlement date to maturity date

(d) The number of days from the last coupon date to settlement date

Upon the maturity of the bond, the client will get the: (a) Face value plus all the coupon interest (b) Accrued interest plus the net selling amount (c) Principal or money out plus the last coupon interest (d) Face value plus the accrued interest (e) Face value plus the last coupon interest

(e) Face value plus the last coupon interest

The coupon interest credited to a client’s account is the same as: (a) Face value multiplied by the net coupon rate and tenor all over 360 (b) Face value multiplied by the net coupon rate and accrued tenor ll over 365 (c) Face amount multiplied by the gross coupon rate and tenor all over 360 (d) Gross coupon interest less tax (e) AandD

(e) AandD

Client’s settlement date for Peso Bonds refers to : (a) The day when the client pays for fees of the bonds he bought (b) The day when the client receives the coupon interest of his bonds (c) The day when the client pays for the cost of the bond plus accruals if applicable (d) The day when the bond was transacted (e) All of the above

What will happen if a client cancels his ROP booking within the same day prior to settlement and the prices in the market remained the same? (a) The Bank will incur a loss because of the difference in the bid offer prices (b) The Bank will payback the client whatever amount he invested (c) The Client will incur actual loss because of the difference in the bid and offer prices (d) The Bank will carry a loss and will look for other buyers (e) The Bank will purchase the Bond at the current offer price

The regular tenors of Treasury Bills are (a) 92,184,364 (b) 90,180,360 (c) 91,182,364 (d) 90,181,364 (e) 91,183.365

If a client sells back his FXTNs, his proceeds will be based on (a) The current market yield (b) The effective yield (c) The offer price in the market (d) The asking yield in the market (e) None of the above

(a) The current market yield

All of the following securities offer good opportunity to profit to when interest rates are going down, but which would provide the most profit if interest rates do go down? (a) 3 year RTBs (b) 1 year TBills (c) 180 day Tbills (d) 3 month Tbills (e) 1 year commercial paper

(a) 3 year RTBs

You are selling Bonds at PAR if (a) The price of the Bond is 100 (b) The selling price of the Bond is below 100 (c) The selling price of the Bond is above 100 (d) The YTM is equal to the coupon rate (e) AandD

(a) The price of the Bond is 100

You are selling Bonds at a discount if (a) The selling YTM is > the coupon rate (b) The selling YTM is < the coupon rate (c) The selling YTM is equal to the coupon rate (d) The Face value is equal to the client’s cash out (e) The Par value is > the client’s cash out

(a) The selling YTM is > the coupon rate

The basic formula for computing the T-Bills money out is: (a) PRT (b) Gross Price plus withholding tax (c) Discounted price plus withholding tax (d) Purchase price plus withholding tax (e) B,C and D

(e) B,C and D

The trading gain/loss in Bonds is computed as (a) Selling Net price less Buying Net price (b) Buying Net price less Selling Net Price (c) Selling Money out less Buying Money out (d) Buying Money out less selling money out (e) BandD

(a) Selling Net price less Buying Net price

The following features of T-Bills are true EXCEPT: (a) It is a direct and conditional obligation of the National Government (b) Its issued at a discount basis and payable at maturity at face value (c) Subject to 20% final withholding tax which is withheld upfront by the seller/issuer (d) Subject to 20% final withholding tax which is inputted in the net selling price of the buyer (e) Tbills are almost like cash or bank notes

(a) It is a direct and conditional obligation of the National Government

The yield to maturity is the (a) Coupon expressed as a percentage of the par value of the bond (b) Effective yield of the Bond (c) The rate of discount which takes into account the current market value and the relationship between the current market value and the value at which the debt will be paid off at maturity (d) BandC (e) AandC

(d) BandC

How much should Mickey invest in Treasury bills if he expects to receive Php1.0MM at the end of 180 days at a gross discounted rate of 4.75%? (a) Php 976,800.98 (b) Php 981,400.78 (c) Php 954,653.93 (d) Php 963,391.13

(b) Php 981,400.78

Minnie bought USD120K of ROP32 at par 36 days after the issuance date. His cash-out was USD120,765.00. The coupon rate of the bond is 6.375%. At what price did he acquire the bond? (a) 107.650 (b) 100.000 (c) 106.375 (d) 120.000 (e) 110.000

(b) 100.000

Charity Foundation, a tax exempt institution invested through Bank ABC Php100MM in BSP SDA for 30 days at 5% gross, how much is client suppose to receive upon maturity? (a) Php100,333,333.33 (b) Php100,416,666.66 (c) Php100,412,087.91 (d) Php100,329,670.33 (e) Php100,400,000.00

(b) Php100,416,666.66

Walt decided to buy USD100K of ROP bonds for settlement on the coupon payment date at 97.75. How much is his cash-out? (a) USD 100,000 (b) USD 97,750 (c) USD 102,250 (d) USD 197,750 (e) Not enough information

(b) USD 97,750

Achilles purchased USD200K of ROP bonds at 117 for settlement 3 days after the coupon payment date. How much is his cash-out if the coupon rate of the bond is 8.75%? (a) USD200,000 (b) USD211,700 (c) USD234,145.83 (d) USD235,000.00 (e) USD240,000.00

Troy already received a total of USD26,625.00 in coupon payments over the last 3 years for his USD100K ROP bond. How much does he receive every coupon payment? (a) USD8,875.00 (b) USD4,437.50 (c) USD3,750.00 (d) USD3,500.00 (e) USD3,250.00

(b) USD4,437.50

Frank already received a total of USD17,750.00 in coupon payments over the last 2 years for his USD100K ROP bond. What is the coupon rate of the ROP? (a) 10% (b) 9.5% (c) 8.875% (d) 8% (e) 7.5%

How much will Helen receive if she sells back her USD100K ROP holdings with 8% coupon at 112.50 for settlement 10 days before the coupon payments date? (a) USD100K (b) USD112,500.00 (c) USD115,500.00 (d) USD116,277.78 (e) USD120K

(d) USD116,277.78

5. Which of the following is needed when computing for the accrued interest of a bond? (a) face value (b) accrued interest (c) coupon rate (d) all of the above (e) none of the above

(d) all of the above

Athena is earning and receiving Php20K every 6 months from the Php500K bond she bought during the initial issuance. What is the coupon rate of the bond? (a) 8% (b) 9% (c) 10% (d) 11% (e) 12%

Mr. Young goes to the branch and informs the branch manager that he will sell his USD200K ROP31 holding and buy USD200K of ROP32. Given the following: ROP31 7.75%cpn 109.75-110.75 ROP32 6.375%cpn 96.25-97.25 At what price will the bank buy Mr. Young’s ROP holding? (a) 97.25 (b) 7.75 (c) 96.25 (d) 109.75 (e) none of the above

(d) 109.75

Thor paid USD116,250.00 for the USD100K ROP bond he bought 10 days after the issuance date. The coupon rate of the bond is 8.75%. What was the offer price of the bond? (a) 116.25 (b) 116.00 (c) 115 (d) 114.5 (e) 114

(b) 116.00

How much will Ruby get every 6 months from the USD300k ROP bond she bought if the coupon rate is 7.75%? (a) USD11,625 (b) USD10,000 (c) USD 7,750 (d) USD 3,750 (e) USD 3,500

(a) USD11,625

What will client get upon the maturity of a bond? (a) principal (b) face value (c) face value and last coupon payment if applicable (d) principal and face value (e) none of the above

Sabrina bought Php1.0MM of RTB with quarterly coupon interest at 7% gross. If the RTB is for 3 years, how much will she receive on the maturity date? (a) Php1,000,000 (b) Php1,014,000 (c) Php1,028,000 (d) Php1,056,000 (e) Php1,070,000

(b) Php1,014,000

What is the coupon rate of a Php1.0MM investment that earns Php12K every quarter? (a) 5% (b) 6% (c) 7% (d) 8% (e) 10%

(b) 6%

How much is the face value of Daisy’s investment if she earns 8% gross or Php20K every 6 months? (a) Php500K (b) Php600K (c) Php625K (d) Php650K (e) Php700K

How long did Rose invest her Php10MM if she received a total of Php2MM for the duration of the placement if the coupon rate of the bond is 10% gross credited semi annually? (a) 1.5 years (b) 2 years (c) 2.5 years (d) 3 years (e) 3.5 years

What is the coupon rate of the Php800K RTB of Kitty if she earned a total of Php76,800.00 after 1.5 years? (a) 5% (b) 6% (c) 7% (d) 8% (e) 9%

(d) 8%

What is the coupon rate of the USD50K ROP bond if the coupon payment is USD1,937.50 every 6 months? (a) 5.75% (b) 6.75% (c) 7.75% (d) 8.75% (e) 9%

How much will Mark receive every 6 months from the 6.375% coupon USD150K ROP he bought? (a) USD4,500 (b) USD4,750 (c) USD4,781.25 (d) USD4,850.75 (e) USD4,900

Mr. Ong goes to the branch and informs the branch manager that he will sell his USD200K ROP31 holding and buy USD200K of ROP32. Given the following: ROP31 7.75%cpn 109.75-110.75 ROP32 6.375%cpn 96.25-97.25 How much will he receive every 6 months for ROP32? (a) USD15,500 (b) USD7,750 (c) USD12,750 (d) USD6,375 (e) USD6,500

(d) USD6,375

How much will Peter pay if he will buy Php1MM Face Value of FXTN with 6.5% coupon at par 5 days after the issuance of the FXTN? (a) Php1.0MM (b) Php1,000,722.22 (c) Php1,250,000 (d) Php1,250,722.22 (e) Php1,300,000

(b) Php1,000,722.22

Jasmin invested Php1,040,500 for Php1,000,000 of RTB with 6.75% gross coupon. How much will she receive every quarter? (a) Php12,000 (b) Php13,500 (c) Php15,000 (d) Php18,500 (e) Php20,000

(b) Php13,500

The current USD/Php exchange rate is (bank buying at 41.00 and selling a 41.35). How much will Leo pay if he will buy USD100K? (a) Php4,125,000 (b) Php4,135,000 (c) Php4,150,000 (d) Php4,100,000 (e) Php4,117,500

(b) Php4,135,000

How much will Brian receive if he invests USD 100k in a time deposit with a bank at 3% gross for 90 days? (a) USD100,000 (b) USD100,693.75 (c) USD100,750 (d) USD100,793.75 (e) USD100,850

(b) USD100,693.75

What are the components in computing for the client’s cash-out when selling ROPs to clients? (a) face value, bid price, coupon rate, accrued tenor (b) face value, offer price, coupon rate, accrued tenor (c) face value, offer price, coupon rate, issue date (d) face value, offer price, coupon rate, maturity date (e) face value, bid price, coupon rate, issue date

(b) face value, offer price, coupon rate, accrued tenor

If Jacki receives php 13,500 from her investment each coupon payment and she paid Php ,1,040,500 for a Retail Treasury Bond with a face value of Php 1,000,000, after how many coupon payments can she consider to be break even on her initial principal investment? (a) 1 coupon payment (b) 2 coupon payments (c) 3 coupon payments (d) 4 coupon payments (e) 5 coupon payments

What is the approximate yield to maturity for an 8%, $1,000 bond purchased for $1,200 and maturing in five years? (a) .64% (b) 4.00% (c) 3.64% (d) 8.00% (e) 4.64%