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A) A 10-year $100 annuity.
B) A 10-year,$1,000 face value,zero coupon bond.
C) A 10-year,$1,000 face value,10% coupon bond with annual interest payments.
D) All 10-year bonds have the same price risk since they have the same maturity.
E) A 10-year,$1,000 face value,10% coupon bond with semiannual interest payments.
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A) If a coupon bond is selling at par,its current yield equals its yield to maturity.
B) If rates fall after its issue,a zero coupon bond could trade at a price above its maturity (or par) value.
C) If rates fall rapidly,a zero coupon bond's expected appreciation could become negative.
D) If a firm moves from a position of strength toward financial distress,its bonds' yield to maturity would probably decline.
E) If a bond is selling at a premium,this implies that its yield to maturity exceeds its coupon rate.
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A) 3.40%
B) 4.20%
C) 3.99%
D) 3.57%
E) 5.04%
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A) If the yield to maturity on each bond decreases to 6%,Bond A will have the largest percentage increase in its price.
B) Bond A has the most price risk.
C) If the yield to maturity on the three bonds remains constant,the prices of the three bonds will remain the same over the next year.
D) If the yield to maturity on each bond increases to 8%,the prices of all three bonds will decline.
E) Bond C sells at a premium over its par value.
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A) One advantage of a zero coupon Treasury bond is that no one who owns the bond has to pay any taxes on it until it matures or is sold.
B) Long-term bonds have less price risk but more reinvestment risk than short-term bonds.
C) If interest rates increase,all bond prices will increase,but the increase will be greater for bonds that have less price risk.
D) Relative to a coupon-bearing bond with the same maturity,a zero coupon bond has more price risk but less reinvestment risk.
E) Long-term bonds have less price risk and also less reinvestment risk than short-term bonds.
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A) The coupon rate should be exactly equal to 6%.
B) The coupon rate could be less than,equal to,or greater than 6%,depending on the specific terms set,but in the real world the convertible feature would probably cause the coupon rate to be less than 6%.
C) The rate should be slightly greater than 6%.
D) The rate should be over 7%.
E) The rate should be over 8%.
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A) Real risk-free rate differences.
B) Tax effects.
C) Default risk and liquidity differences.
D) Maturity risk differences.
E) Inflation differences.
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A) 4.86%
B) 7.01%
C) 6.15%
D) 5.72%
E) 6.58%
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