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12 A General Electric bond, with a face value of $1,000, carries a coupon rate of 8%, has nine years until maturity, and has a yield to maturity of 7%. How much interest is paid annually to the bondholders? A $800 8. $70 C $90 D. $80 E. $700 13. Referring to the previous problem (#121, note that the YTM is 7%. This tells you that: A. There is a higher risk of default on the bond B. Interest rates have increased since the bond was purchased C. The bond was purchased at a premium D. The bond was purchased at a discount E. This is an example of a floating rate bond 14. Modified Duration is a term used in the bond trading world to measure what? A. The sensitivity of interest rates to changes in bond prices The sensitivity of a bond's price to changes in interest rates C. The term of a bond adjusted for inflation D. The volatility of stock prices E. Whether or not a bond is investment grade (as opposed to junk bonds") 15. The source of all interest rate changes is the Federal Reserve Board. The FRB can control the amount of money in the system by tweaking the federal funds rate. If the FRB would happen to increase the federal funds rate, thereby causing an increase in market interest rates systemwide, it would cause: A. Bond prices to increase B. Old bonds to be redeemed in exchange for the higher interest rate C. Bond prices to decrease D. Bond prices on domestic issues would rise but there would be no impact on foreign investments. 16. The book value of a corporation is a less than rellable measurement of the real value of a company because: A. Some assets are recorded at historical cost 8. Intangible assets (i.e. intellectual property) are often not recorded on the books C. Buildings are depreciated and therefore not reported at their real value. D. All the above E. None of the above

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