Bài test tiếng Anh ngành ngân hàng và đáp án phần 8

C prices of securities adjust as new information becomes available to the market.D All of the above are true.Ans: D Format: Multiple Choice Learning Objective: LO 1 Level of Difficulty:

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Format: True/False

Learning Objective: LO 1

Level of Difficulty: Easy

1 A security's true value is the price that reflects investors' estimates of the value of the cash flows they expect to receive in the future

2 In an efficient capital market, security prices fully reflect the knowledge and

expectations of all investors at a particular point in time

3 If market prices reflect all relevant information about securities at a particular point in time, it is called operational efficiency

4 If market prices reflect all relevant information about securities at a particular point in time, it is called informational efficiency

Ans: A

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Format: True/False

5 If a market is strong-form market efficient, one would be able to beat the market with inside information

6 Semistrong market efficiency implies that only public information that is available to all investors is reflected in a security's market price

7 Public stock markets in developed countries like the United States have strong-form of market efficiency

8 The largest investors in corporate bonds are banks and state government agencies

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Ans: B

Format: True/False

9 The largest investors in corporate bonds are life insurance companies and pension funds

10 Most secondary market transactions for corporate bonds take place on the New York Stock Exchange

11 Most secondary market transactions for corporate bonds take place through dealers in the over-the-counter (OTC) market

12 A thin market for a security implies a high frequency of trades for that type of security

in the markets

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B) False

Ans: B

Format: True/False

13 Corporate bonds have a thin market relative to stocks

14 Prices in the corporate bond market tend to be more volatile than securities sold in markets with greater trading volumes

15 Vanilla bonds have coupon payments that are fixed for the life of the bond, with the principal being repaid at maturity

Ans: A

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Format: True/False

16 The face or par value for bonds is the amount paid to bondholders at maturity and is usually equal to $1,000

17 Zero coupon bonds sell well above their par value because they offer no coupons

18 Convertible bonds can be converted into shares of common stock at some

predetermined ratio at the discretion of the bondholder

19 The value, or price, of any asset is the present value of its future cash flows

Ans: A

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Format: True/False

20 The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments equal to the price of the bond

21 Interest rate risk is the risk that bond prices will fluctuate as interest rate changes

22 As interest rates fall, the prices of bonds decline

23 Higher coupon bonds have greater interest rate risk

Ans: B

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Format: True/False

Level of Difficulty: Medium

24 All other things being equal, a given change in the interest rates will have a greater impact on the price of a low-coupon bond than a higher-coupon bond with the same maturity

25 Bonds with a call provision sell at lower market yields than comparable noncallable bonds

26 The risk that the lender may not receive payments as promised is called default risk

27 U.S Treasury securities do not have any default risk and are the best proxy measure forthe risk-free rate

Ans: A

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Format: True/False

28 Ascending or normal yield curves are upward-sloping yield curves that occur when an economy is heading into recession

29 If investors believe inflation will be increasing in the future, the prevailing yield will bedownward sloping

30 The real rate of interest varies with the business cycle, with the highest rates seen at the end of a period of business expansion and the lowest at the bottom of a recession

31 In an efficient capital market,

A) security prices fully reflect the knowledge and expectations of all investors at a particular point in time

B) investors and financial managers have no reason to believe the securities are not priced at or near their true value

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C) prices of securities adjust as new information becomes available to the market.D) All of the above are true.

Ans: D

Format: Multiple Choice

32 Which one of the following statements is NOT true?

A) The overall efficiency of a capital market depends on its operational efficiency and its informational efficiency

B) Operational efficiency focuses on bringing buyers and sellers together at the lowest possible cost

C) If market prices reflect all relevant information about securities at a particular point in time, the market is operationally efficient

D) All of the above are true

Ans: C

A) Competition among investors is an important driver of informational efficiency.B) If market prices reflect all relevant information about securities at a particular point in time, the market is informationally efficient

C) In an informationally efficient market, market prices adjust quickly to new information about a security as it becomes available

Ans: D

34 With strong-form market efficiency,

A) the price of a security in the market reflects all public information only

B) it would not be possible to earn abnormally high returns by trading on private

information

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C) investors who have access to inside or private information will be able to earn abnormal returns.

D) None of the above

Ans: B

35 With semistrong-form market efficiency,

A) the price of a security in the market reflects all public information only

B) it would be possible to earn abnormally high returns by trading on public

A) Weak-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns

B) Semistrong-form market efficiency implies that investors who have access to inside or private information will be able to earn abnormal returns

C) Strong-form market efficiency implies that investors who have access to inside orprivate information will be able to earn abnormal returns

Ans: C

37 Which ONE of the following statements is true?

A) The largest investors in corporate bonds are life insurance companies and pensionfunds

B) The market for corporate bonds is thin

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C) Prices in the corporate bond market also tend to be more volatile.

Ans: D

A) Prices in the corporate bond market also tend to be more volatile than the marketsfor stocks or money market securities

B) Corporate bonds are more marketable than the securities that have higher daily trading volumes

C) The market for corporate bonds is thin

D) The largest investors in corporate bonds are life insurance companies and pensionfunds

Ans: B

39 It is easy for individuals to trade in the corporate bond market because

A) the corporate bond market is considered to be very transparent

B) prices in the corporate bond market tend to be more stable

C) centralized reporting of deals between buyers and sellers take place

D) None of the above statements are true

Ans: D

40 Which one of the following statements about vanilla bonds is NOT true?

A) They have no special provisions

B) The face value, or par value, for most corporate bonds is $1,000

C) Coupon payments are usually made quarterly

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D) The bond's coupon rate is calculated as the annual coupon payment divided by the bond's face value.

Ans: C

A) Zero coupon bonds have no coupon payments over its life and only offer a single payment at maturity

B) Zero coupon bonds sell well below their face value (at a deep discount) because they offer no coupons

C) The most frequent and regular issuer of zero coupon securities is the U.S

A) To secure the conversion option on a bond, bondholders would be willing to pay

a premium

B) The conversion ratio is set so that the firm's stock price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity

C) Convertible bonds can be converted into shares of common stock at some

predetermined ratio at the discretion of the bondholder

Ans: D

43 Which one of the following statements about bond price is NOT true?

A) To compute a bond's price, one needs to calculate the present value of the bond's expected cash flows

B) The value, or price, of any asset is the future value of its cash flows

C) The required rate of return, or discount rate, for a bond is the market interest rate called the bond's yield to maturity

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D) Estimate the expected future cash flows using the coupons that the bond will pay and the maturity value to be received.

Ans: B

44 If a bond's coupon rate is equal to the market rate, then the bond will sell

A) at a price equal to its face value

B) at a price greater than its face value

C) at a price less than its face value

D) None of the above are true

Ans: A

45 Bonds sell at a discount off the par value when market rates for similar bonds areA) less than the bond's coupon rate

B) greater than the bond's coupon rate

C) equal to the bond's coupon rate

D) Market rates are irrelevant in determining a bond's price

Ans: B

46 Bonds sell at a premium over the par value when market rates for similar bonds areA) less than the bond's coupon rate

B) greater than the bond's coupon rate

C) equal to the bond's coupon rate

D) Market rates are irrelevant in determining a bond's price

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Ans: A

47 In calculating the current price of a bond paying semiannual coupons, one needs toA) use double the number of years for the numberof payments

B) use half the annual coupon

C) use half the annual rate as the discount rate

D) All of the above need to be done

Ans: D

48 Which one of the following statements about zero coupon bonds is NOT true?

A) Zero coupon bonds have no coupon payments but promise a single payment at maturity

B) Zero coupon bonds must sell for less than similar bonds that make periodic coupon payments

C) Zero coupon bonds make coupon payments but no principal payment at maturity.D) All of the above statements are true

Ans: C

A) The yield to maturity of a bond is the discount rate that makes the present value

of the coupon and principal payments equal to the price of the bond

B) It is the yield that the investor earns if the bond is held to maturity, and all the coupon and principal payments are made as promised

C) A bond's yield to maturity changes daily as interest rates increase or decrease.D) All of the above are true

Ans: D

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50 The yield to maturity of a bond is the discount rate that makes the present value of the coupon and principal payments

A) exceed the price of the bond

B) equal to zero

C) equal to the price of the bond

D) less than the price of the bond

Ans: C

A) The realized yield is the return earned on a bond given the cash flows actually

received by the investor

B) The realized yield is equal to the yield to maturity even if the bond is sold prior tomaturity

C) It is the interest rate at which the present value of the actual cash flows generated

by the investment equals the bond's price at the time of sale of the bond

Ans: C

A) Interest rate risk is the risk that bond prices will change as interest rates change.B) Interest rate changes and bond prices are inversely related

C) As interest rates increase, bond prices increase

D) Long-term bonds are more price volatile than short-term bonds of similar risk.Ans: C

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A) Long-term bonds have lower price volatility than short-term bonds

B) As interest rates decline, the prices of bonds rise; and as interest rates rise, the prices of bonds decline

C) All other things being equal, short-term bonds are more risky than long-term bonds

D) Interest rate risk decreases as maturity increases

Ans: B

54 Marketability is the ability of an investor

A) to sell a security quickly, at a low transaction cost, and at a price close to its fair market value

B) to sell at a profit under all circumstances

C) to sell the security above its par value

Ans: A

A) The lower the transaction costs are, the greater a security's marketability

B) The interest rate, or yield, on a security varies inversely with its degree of marketability

C) U.S Treasury bills have the largest and most active secondary market and are considered to be the most marketable of all securities

Ans: D

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A) The risk that the lender may not receive payments as promised is called default risk

B) Investors must pay a premium to purchase a security that exposes them to default risk

C) U.S Treasury securities do not have any default risk and are the best proxy measure for the risk-free rate

D) All of the above are true statements

Ans: B

57 Inverted yield curves are observed when

A) the economy is growing

B) the economy is stagnant

C) the economy is in recession

Ans: C

A) The relationship between yield and marketability is known as the term structure

of interest rates

B) The shape of the yield curve is not constant over time

C) As the general level of interest rises and falls over time, the yield curve shifts up and down and has different slopes

D) Yield curves show graphically how market yields vary as term to maturity

changes

Ans: A

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59 The three economic factors that determine the shape of the yield curve are

A) the real rate of interest, the expected rate of inflation, and marketability

B) the real rate of interest, the expected rate of inflation, and interest rate risk.C) the nominal rate of interest, the expected rate of inflation, and interest rate risk.D) the real rate of interest, the nominal rate of interest, and interest rate risk

Ans: B

A) The longer the maturity of a security, the greater its interest rate risk

B) If investors believe inflation will be subsiding in the future, the prevailing yield will be upward sloping

C) The real rate of interest varies with the business cycle, with the lowest rates seen

at the end of a period of business expansion and the lowest at the bottom of a recession

D) The interest risk premium always adds a downward bias to the slope of the yield curve

Ans: A

61 Bond price: Briar Corp is issuing a 10-year bond with a coupon rate of 7 percent The

interest rate for similar bonds is currently 9 percent Assuming annual payments, what

is the present value of the bond? (Round to the nearest dollar.)

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Years to maturity = n = 10

Coupon rate = C = 7%

Annual coupon = $1,000 x 0.07 = $70

Current market rate = i = 9%

Present value of bond = PB

62 Bond price: Regatta, Inc., has six-year bonds outstanding that pay a 8.25 percent

coupon rate Investors buying the bond today can expect to earn a yield to maturity of 6.875 percent What should the company's bonds be priced at today? Assume annual coupon payments (Round to the nearest dollar.)

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Years to maturity = n = 6

Coupon rate = C = 8.25%

Annual coupon = $1,000 x 0.0825 = $82.50

Current market rate = i = 6.875%

63 Bond price: Triumph Corp issued five-year bonds that pay a coupon of 6.375

annually The current market rate for similar bonds is 8.5 percent How much will you

be willing to pay for Triumph's bond today? Round to the nearest dollar

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64 Bond price: Your friend recommends that you invest in a three-year bond issued by

Trimer, Inc., that will pay annual coupons of 10 percent Similar investments today willyield 6 percent How much should you pay for the bond? (Round to the nearest dollar.)

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Level of Difficulty: Hard

65 Bond price: Kevin Rogers is interested in buying a five-year bond that pays a coupon

of 10 percent on a semiannual basis The current market rate for similar bonds is 8.8 percent What should be the current price of this bond? (Round to the nearest dollar.)

Current market rate = i = 8.8%

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66 Bond price: Giant Electronics is issuing 20-year bonds that will pay coupons

semiannually The coupon rate on this bond is 7.8 percent If the market rate for such bonds is 7 percent, what will the bonds sell for today? (Round to the nearest dollar.)

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67 Bond price: Jane Thorpe has been offered a seven-year bond issued by Barone, Inc., at

a price of 943.22 The bond has a coupon rate of 9 percent and pays the coupon

semiannually Similar bonds in the market will yield 10 percent today Should she buy the bonds at the offered price? (Round to the nearest dollar.)

A) Yes, the bond is worth more at $1,015

B) No, the bond is only worth $921

C) Yes, the bond is worth more at $951

D) No, the bond is only worth $912

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