Question 1

If overall interest rates in the economy fall,then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following investment characteristics would be favorable to an investor? I.Callable
II) Convertible
III) Cumulative dividends
IV) Pledge of collateral

Accepted Answer

A)   I,II and III are correct
B)   II,III and IV are correct
C)   I and III are correct
D)   I,II,III and IV are all correct
E)   I and II are correctF) All of the above
G) B) and D)

Question 3

A subordinated debenture is a more secure investment than a mortgage bond.

Accepted Answer

A) True 
 B)False

Question 4

A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

Accepted Answer

A) True 
 B)False

Question 5

The yield to maturity takes into account the relationship among a bond's maturity value and

Accepted Answer

A)   the time to maturity.
B)   the current price.
C)   the dollar amount of interest.
D)   the corporate rate
E)   the time to maturity,the current price,the dollar amount of interest,and the corporate rate.F) A) and B)
G) B) and C)

Question 6

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) None of the above
G) C) and E)

Question 7

Assume that you purchased a $1,000 Mobil Corporation bond that pays 8.25 percent interest.What is the amount of interest you would receive each six months?

Accepted Answer

A)   $4.125
B)   $8.25
C)   $82.50
D)   $41.25
E)   $1,000F) All of the above
G) C) and D)

Question 8

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 B)
G) C) and E)

Question 9

The method used to pay bondholders their interest is the same regardless the type of bond.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Collateral trust bonds are secured,through a pledge of real property.

Accepted Answer

A) True 
 B)False

Question 12

If overall interest rates in the economy decrease,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 D)
G) B) and C)

Question 13

The only way an investor can make money on a bond investment is to hold the bond until maturity.

Accepted Answer

A) True 
 B)False

Question 14

What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $975?

Accepted Answer

A)   7 percent
B)   7.18 percent
C)   8.33 percent
D)   9 percent
E)   10 percentF) All of the above
G) B) and D)

Question 15

A sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue.

Accepted Answer

A) True 
 B)False

Question 16

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 17

The sale of bonds can also improve a corporation's financial leverage.

Accepted Answer

A) True 
 B)False

Question 18

The yield to maturity takes into account both interest income from the purchase date until the maturity date and the difference between the purchase price and the maturity value.

Accepted Answer

A) True 
 B)False

Question 19

When a bond is selling for less than its face value,it is said to be selling at a:

Accepted Answer

A)   discount.
B)   premium.
C)   commission.
D)   conservative value.
E)   prospectus value.F) All of the above
G) C) and D)

Question 20

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

Accepted Answer

A)   debenture
B)   mortgage
C)   indenture
D)   preemptive
E)   treasuryF) A) and D)
G) A) and E)

Exam 12: Investing in Stocks

Assume that you purchased a $1,000 Mobil Corporation bond that pays 8.25 percent interest.What is the amount of interest you would receive each six months?

Correct AnswerverifiedShow Answer

The method used to pay bondholders their interest is the same regardless the type of bond.

Correct AnswerverifiedShow Answer

A sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a bond is selling for less than its face value,it is said to be selling at a:

Correct AnswerverifiedShow Answer

The sale of bonds can also improve a corporation's financial leverage.

Correct AnswerverifiedShow Answer

The only way an investor can make money on a bond investment is to hold the bond until maturity.

Correct AnswerverifiedShow Answer

A subordinated debenture is a more secure investment than a mortgage bond.

Correct AnswerverifiedShow Answer

Collateral trust bonds are secured,through a pledge of real property.

Correct AnswerverifiedShow Answer

What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $975?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The yield to maturity takes into account the relationship among a bond's maturity value and

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following investment characteristics would be favorable to an investor? I.Callable II) Convertible III) Cumulative dividends IV) Pledge of collateral

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

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

Correct AnswerverifiedShow Answer

The yield to maturity takes into account both interest income from the purchase date until the maturity date and the difference between the purchase price and the maturity value.

Correct AnswerverifiedShow Answer

If overall interest rates in the economy fall,then a corporate bond with a fixed interest rate will decrease in value.

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

A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

Correct AnswerverifiedShow Answer

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