Question 1

A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments,repayment,and assets is called a:

Accepted Answer

A)  debenture bond.
B)  mortgage bond.
C)  subordinated debenture.
D)  preemptive bond.
E)  treasury bond.F) B) and E)
G) B) and D)

Question 2

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

Accepted Answer

A) True 
 B)False

Question 3

The quality rating given by Standard & Poor's to bonds that are highly speculative and near default is:

Accepted Answer

A)  high-grade.
B)  problematic or default.
C)  investment-grade.
D)  medium-grade.
E)  unrated.F) A) and D)
G) A) and E)

Question 4

A bond debenture is a legal document that details all of the conditions relating to a bond issue.

Accepted Answer

A) True 
 B)False

Question 5

A type of bond that is still issued by corporations in foreign countries,but is no longer issued by U.S.corporations is called a:

Accepted Answer

A)  registered bond.
B)  bearer bond.
C)  registered coupon bond.
D)  serial bond.
E)  mortgage bond.F) A) and B)
G) B) and D)

Question 6

You are a taxpayer in the 24 percent tax bracket and you own a tax-exempt bond that pays 6 percent.What is your taxable equivalent yield?

Accepted Answer

A)  5.00 percent
B)  6.00 percent
C)  7.89 percent
D)  7.20 percent
E)  14.40 percentF) B) and E)
G) B) and D)

Question 7

Which is true of convertible bonds?

Accepted Answer

A)  They pay both interest and dividends simultaneously.
B)  They pay no interest payments.
C)  They can be repurchased by the issuing corporation before the maturity date.
D)  They must be carefully evaluated like all potential investments.
E)  They are always quality investments.F) C) and D)
G) All of the above

Question 8

Elizabeth Cherry has a bond that has 10 years to maturity,a face value of $1,000,an 7% interest rate,and a market price of $1,100.What is the dollar amount of annual interest on this bond?

Accepted Answer

A)  $20
B)  $70
C)  $100
D)  $110
E)  $200F) A) and B)
G) B) and C)

Question 9

The minimum price that a seller is willing to receive for a government security is known as the ________ price.

Accepted Answer

A)  bid
B)  ask
C)  contract
D)  government
E)  adjustedF) A) and B)
G) A) and C)

Question 10

Investors purchase corporate bonds:

Accepted Answer

A)  to earn interest income.
B)  to gain possible dollar appreciation of bond value.
C)  to receive bond repayment at maturity.
D)  because they consider them a safer investment than stocks.
E)  All of theseF) B) and E)
G) A) and B)

Question 11

If your primary goal is current yield,which one of these bonds is the wiser investment? Bond A: $1,000 corporate bond that pays 6 percent and has a current market value of $700; or Bond B: $1,000 corporate bond that pays 7.25 percent and has a current market value of $800?

Accepted Answer

Bond A current yield = ($1,000...

Question 12

In the U.S.,the ________ for a bond represents the price of the bond plus accrued interest earned since the last interest payment date.

Accepted Answer

A)  dirty price
B)  asked price
C)  spread
D)  clean price
E)  coupon priceF) C) and D)
G) A) and C)

Question 13

The highest bond rating issued by Standard & Poor's is:

Accepted Answer

A)  AAA.
B)  Aaa.
C)  A+.
D)  BB.
E)  Aa.F) A) and E)
G) B) and D)

Question 14

A convertible bond is a bond that can be exchanged,at the holder's option,for a specified number of shares of the corporation's common stock.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is the process of spreading your money among several different types of investments to lessen risk?

Accepted Answer

A)  Book entry
B)  Professional management
C)  Asset allocation
D)  Bond laddering
E)  Dollar appreciationF) B) and C)
G) A) and B)

Question 16

Treasury bonds are issued in $5,000 units with 10-year maturities.

Accepted Answer

A) True 
 B)False

Question 17

If overall interest rates in the economy fall,a corporate bond with a fixed interest rate will generally:

Accepted Answer

A)  increase in value.
B)  decrease in value.
C)  remain unchanged.
D)  become worthless.
E)  be returned to the corporation.F) B) and E)
G) A) and E)

Question 18

Which one of the following bonds would likely have the lowest risk?

Accepted Answer

A)  Treasury bill
B)  Municipal bond
C)  Common stock
D)  Corporate bond
E)  Junk bondF) A) and E)
G) D) and E)

Question 19

In reality,there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

Accepted Answer

A) True 
 B)False

Question 20

Assume that you purchase a $1,000 corporate bond that pays 8.25 percent interest.What is the dollar amount of interest that you receive each year?

Accepted Answer

A)  $1,000.00
B)  $82.50
C)  $82.00
D)  $80.00
E)  $8.25F) B) and D)
G) C) and D)

Exam 15: Investing in Bonds

Treasury bonds are issued in $5,000 units with 10-year maturities.

Correct AnswerverifiedShow Answer

Assume that you purchase a $1,000 corporate bond that pays 8.25 percent interest.What is the dollar amount of interest that you receive each year?

Correct AnswerverifiedShow Answer

You are a taxpayer in the 24 percent tax bracket and you own a tax-exempt bond that pays 6 percent.What is your taxable equivalent yield?

Correct AnswerverifiedShow Answer

In the U.S.,the ________ for a bond represents the price of the bond plus accrued interest earned since the last interest payment date.

Correct AnswerverifiedShow Answer

A convertible bond is a bond that can be exchanged,at the holder's option,for a specified number of shares of the corporation's common stock.

Correct AnswerverifiedShow Answer

The minimum price that a seller is willing to receive for a government security is known as the ________ price.

Correct AnswerverifiedShow Answer

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

Correct AnswerverifiedShow Answer

If your primary goal is current yield,which one of these bonds is the wiser investment? Bond A: $1,000 corporate bond that pays 6 percent and has a current market value of $700; or Bond B: $1,000 corporate bond that pays 7.25 percent and has a current market value of $800?

Correct AnswerverifiedBond A current yield = ($1,000...View AnswerShow Answer

A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments,repayment,and assets is called a:

Correct AnswerverifiedShow Answer

If overall interest rates in the economy fall,a corporate bond with a fixed interest rate will generally:

Correct AnswerverifiedShow Answer

Which one of the following bonds would likely have the lowest risk?

Correct AnswerverifiedShow Answer

Investors purchase corporate bonds:

Correct AnswerverifiedShow Answer

A bond debenture is a legal document that details all of the conditions relating to a bond issue.

Correct AnswerverifiedShow Answer

Elizabeth Cherry has a bond that has 10 years to maturity,a face value of $1,000,an 7% interest rate,and a market price of $1,100.What is the dollar amount of annual interest on this bond?

Correct AnswerverifiedShow Answer

A type of bond that is still issued by corporations in foreign countries,but is no longer issued by U.S.corporations is called a:

Correct AnswerverifiedShow Answer

The quality rating given by Standard & Poor's to bonds that are highly speculative and near default is:

Correct AnswerverifiedShow Answer

Which of the following is the process of spreading your money among several different types of investments to lessen risk?

Correct AnswerverifiedShow Answer

Which is true of convertible bonds?

Correct AnswerverifiedShow Answer

The highest bond rating issued by Standard & Poor's is:

Correct AnswerverifiedShow Answer

In reality,there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

Correct AnswerverifiedShow Answer

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Bond A current yield = ($1,000...
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