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ABM BOND INVESTMENT SUMS : BY Krishna Sah

S1: A 15 year, 8 % Rs 1000 face value bond is currently trading at Rs 958. The YTM of
this bond must be
1) less than 8%
2) equal to 8%
3) greater than 8%
4) unknown
Ans: 3)
S2: Of the following bonds, which one has the highest degree of interest rate risk ?
1) 20 years 8% bond
2) 5 years 8% bond
3) 10 years 8% bond
4) not enough information
Ans : 1)
S3: M/S Krishna Corp has just issued a 10 year 7 % coupon bond. The face value of the
bond is Rs 1000 and the bond makes annual coupon payments. If the required return on
the bond is 10% , what is the bond's price ?
1) Rs 815.66
2) Rs 923.67
3) Rs 1000.00
4) Rs 1256.35
Ans : 1)
S4: Bavarian Susage just issued a 10 year 7% coupon bond. The face value of the bond
is Rs 1000 and the bond makes semiannual coupon payments. If the required return on
the bond is 10% , what is the price of bond ?
1) Rs 815.66
2) Rs 1000.00
3) Rs 813.07
4) Rs 1035.27
Ans : 3)
S5: A bond has been issued for a 10 year 12% coupon bond. The face value of the
bond is Rs 1000.00 and the bond makes annual coupon payements. If the bond os
trading at Rs 967.25 , what is the bond's yield to maturity ?
1) 12.00%
2) 12.59%
3) 11.26%
4) 13.27%
Ans: 1)
S6: Krishna & Corp has just issued a 10 year 12% bond. The face value of the bond is
Rs 1000.00 and the bond makes semiannual coupon payements. If the bond is trading
at Rs 867.25, what is the bond's YTM ?
1) 12.00%
2) 12.37 %
3) 14.56%
4) 10.86%

Ans : 3)
S7: The real return is 10% and the expected rate of return is 4.5% . What is the nominal
rate of return ?
1) 4.50%
2) 14.95%
3) 10.00%
4) 8.69%
Ans : 2)
S8: You bought a 5 year Zero Coupon bond with a Rs 1000 face value for Rs 735.67.
What is the YTM of this bond ?
1) 10.36%
2) 6.33%.
3) 4.69%
4) 8.18%
Ans: 2)
S9: You have the choice between investing in a corporate bond with a yield of 8% or a
muncipal bond. If your marginal tax rate is 28% , what should be the yield on the
muncipal bond in order to be competitive ?
1) 8.00%
2) 5.76 %
3) 11.11 %
4) 13. 69%
Ans : 2)
S10: You owe me , Inc. has a 12 year bond outstanding that makes 9.5% annual coupon
payments. If the appropriate discount rate for such a bond is 7% , what the appropriate
price of bond is ?
1) Rs 1200.00
2) Rs 1000.56
3) Rs 1198.57
4) Rs 762.56
Ans : 3)
S11: You recently earned a 13% return on an investment during the preceding year. If
the inflation rate during that period is 8% what wad your real return during that period ?
1) 5%
2) 4.63 %
3) 4.42%
4) None
Ans : 2)
S13: You will be receiving Rs 2,04,000 at the end of each year for the next 20 years. If
the correct discount rate for such a stream of cash is 10% then what is the present value
of the cas flow ?
1) Rs 1,73,767.00
2) Rs 1,45.867.00
3) Rs 3,56,864.00
4) None

S14: You find that the yield on a 6 year bond is 12% while that of 4 year bond is 9%.
What should be the yield on a 2 year bond beginning 4 from now ?
1) 18.25%
2) 16.56%
3) 12.65%
4) None
Ans: 1)
S15: A 6 year bond pays interest Rs 80 annualy and sells at Rs 950 what is it's coupon
rate, current yield and YTM ?
Answer : 8% , 8.42% , 9.059%