Question 1

Because bonds are considered debt financing that must be repaid at maturity,the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Accepted Answer

A) True 
 B)False

Question 2

XYZ Corporation wants to retire a $60 million bond issue before the maturity date.In order to call the bonds in this issue,the corporation must pay the bondholders the face value plus a premium.What is the typical premium for bonds that have been called?

Accepted Answer

A)  $100
B)  $50-$100
C)  $20-$75
D)  $10-$25
E)  $1-$10F) A) and B)
G) A) and C)

Question 3

Generally,U.S.government securities issued by the Treasury Department:

Accepted Answer

A)  are not graded because they are risk free for practical purposes.
B)  receive the Standard & Poor's AAA rating.
C)  receive the Moody's Aaa rating.
D)  receive The Wall Street Journal's U.S.Government rating.
E)  receive the Treasury Department's "risk-free" rating.F) A) and D)
G) A) and E)

Question 4

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 8 percent,what is the approximate market value for of the 6 percent bond?

Accepted Answer

A)  $1,000
B)  $800
C)  $750
D)  $600
E)  $500F) A) and B)
G) All of the above

Question 5

Tax-exempt bonds offer slightly higher interest rates than corporate bonds.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is issued by state and local governments?

Accepted Answer

A)  Treasury bond
B)  Treasury bill
C)  municipal bond
D)  corporate bond
E)  common stockF) A) and E)
G) B) and C)

Question 7

Which type of bond would provide the most price stability?

Accepted Answer

A)  discount
B)  short-term
C)  long-term
D)  speculative
E)  zero-couponF) A) and D)
G) A) and C)

Question 8

The price at which a dealer is willing to sell a government security is known as the ____________ price.

Accepted Answer

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

Question 9

Corporate and Treasury bonds generally produce more interest revenue than municipal bonds.Why do investors choose to buy municipal bonds?

Accepted Answer

The answer of Corporate and Treasury bonds generally produce more...

Question 10

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 11

Which one of the following statements is correct?

Accepted Answer

A)  Stock is a form of debt capital.
B)  Stock must be repaid at maturity.
C)  Bonds are a form of debt capital.
D)  Bonds do not have to be repaid at maturity.
E)  Interest payments to bondholders must be declared by the board of directors.F) C) and E)
G) A) and E)

Question 12

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 13

The legal conditions for a corporate bond are described in the:

Accepted Answer

A)  trustee contract.
B)  bondholder's covenant.
C)  corporate charter.
D)  bond indenture.
E)  bond debenturE.F) B) and D)
G) B) and E)

Question 14

Dave Johnson's objective was to purchase a government bond that provided some protection against inflation and higher prices.To fulfill this objective,John purchased a:

Accepted Answer

A)  T-bill.
B)  T-note.
C)  T-bond.
D)  TIPS.
E)  general obligation bond.F) B) and E)
G) B) and D)

Question 15

Tom McCallister buys a bond that the company can retire before maturity if they wish.What type of bond has Tom purchased?

Accepted Answer

A)  debenture bond
B)  subordinated debenture bond
C)  convertible bond
D)  callable bond
E)  high-yield bondF) C) and D)
G) A) and D)

Question 16

Interest payments for registered bonds are usually mailed directly to the bondholder of record.

Accepted Answer

A) True 
 B)False

Question 17

The current yield for a bond is determined by dividing the annual income amount by the current market value.

Accepted Answer

A) True 
 B)False

Question 18

Treasury notes are issued in $100 units with a maturity of more than 1 year,but not more than 10 years.

Accepted Answer

A) True 
 B)False

Question 19

Which bond rating does Standard & Poor's assign to a bond that is in default?

Accepted Answer

A)  A
B)  B
C)  C
D)  D
E)  ZF) C) and D)
G) B) and E)

Question 20

The financially independent firm or individual that acts as the bondholders' representative is the:

Accepted Answer

A)  chairman of the board.
B)  president of the corporation.
C)  debenture holder.
D)  indenture holder.
E)  trusteE.F) A) and D)
G) A) and C)

Exam 15: Investing in Bonds

XYZ Corporation wants to retire a $60 million bond issue before the maturity date.In order to call the bonds in this issue,the corporation must pay the bondholders the face value plus a premium.What is the typical premium for bonds that have been called?

Correct AnswerverifiedShow Answer

The financially independent firm or individual that acts as the bondholders' representative is the:

Correct AnswerverifiedShow Answer

Dave Johnson's objective was to purchase a government bond that provided some protection against inflation and higher prices.To fulfill this objective,John purchased a:

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

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

The legal conditions for a corporate bond are described in the:

Correct AnswerverifiedShow Answer

Tom McCallister buys a bond that the company can retire before maturity if they wish.What type of bond has Tom purchased?

Correct AnswerverifiedShow Answer

Generally,U.S.government securities issued by the Treasury Department:

Correct AnswerverifiedShow Answer

The price at which a dealer is willing to sell a government security is known as the ____________ price.

Correct AnswerverifiedShow Answer

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 8 percent,what is the approximate market value for of the 6 percent bond?

Correct AnswerverifiedShow Answer

Which one of the following is issued by state and local governments?

Correct AnswerverifiedShow Answer

Which type of bond would provide the most price stability?

Correct AnswerverifiedShow Answer

Because bonds are considered debt financing that must be repaid at maturity,the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Correct AnswerverifiedShow Answer

Treasury notes are issued in $100 units with a maturity of more than 1 year,but not more than 10 years.

Correct AnswerverifiedShow Answer

Tax-exempt bonds offer slightly higher interest rates than corporate bonds.

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

Corporate and Treasury bonds generally produce more interest revenue than municipal bonds.Why do investors choose to buy municipal bonds?

Correct AnswerverifiedShow Answer

The current yield for a bond is determined by dividing the annual income amount by the current market value.

Correct AnswerverifiedShow Answer

Which bond rating does Standard & Poor's assign to a bond that is in default?

Correct AnswerverifiedShow Answer

Interest payments for registered bonds are usually mailed directly to the bondholder of record.

Correct AnswerverifiedShow Answer

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