FIN $3403$

Spring $2024$

Name Roge lio

Beltran

Exam #$2$

Student ID $6196673$

A call provision gives bondholders the right to demand, or "call for," repayment of a bond. Typically, companies call bonds if interest rates rise and do not call them if interest rates decline.

A

B

$2.$ A $10-$year bond pays an annual coupon, its YTM is $8\%,$ and it currently trades at a premium. Which of the following statements is CORRECT?

A If the yield to maturity increases, then the bond's price will increase.

B The bond's coupon rate is less than $8\%.$

C If the yield to maturity remains at $8\%,$ then the bond's price will decline over the next year.

D The bond's current yield is less than $8\%.$

$3.$ Which of the following statements is CORRECT?

A Convertible bonds generally have lower coupon rates than non$-$convertible bonds of similar default risk because they offer the possibility of capital gains.

B Senior debt is debt that has been more recently issued, and in bankruptcy it is paid off after junior debt because the junior debt was issued first.

C A company's subordinated debt has less default risk than its senior debt.

E Junk bonds typically provide a lower yield to maturity than investment$-$grade bonds.

$4.$ Ryngaert Inc. recently issued noncallable bonds that mature in $15$ years. They have a par value of $$1,000$ and an annual coupon of $5\mathrm{.}7\%.$ If the current market interest rate is $7\mathrm{.}7\%,$ at what price should the bonds sell?

A $$1,015\mathrm{.}52$

B $$924\mathrm{.}70$

C $$825\mathrm{.}63$

D $$652\mathrm{.}25$