Question 1

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

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

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

Question 4

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

Question 5

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) adjusted 
A) bid 
B) ask 
C) contract 
D) government 
E) adjusted

Question 6

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 7

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

Question 8

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

Question 9

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 10

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. 
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.

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

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

Question 13

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

Question 14

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

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 appreciation 
A) Book entry 
B) Professional management 
C) Asset allocation 
D) Bond laddering 
E) Dollar appreciation

Question 16

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

Question 17

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 18

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

Accepted Answer

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

Question 19

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 these 
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 these

Question 20

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

Accepted Answer

A) True 
 B)False

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

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

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?

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:

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

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

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?

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

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.

Which is true of convertible bonds?

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?

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:

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

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?

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

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

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

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

Investors purchase corporate bonds:

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

Personal Finance Basics and the Time Value of Money

Financial Aspects of Career Planning

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

Financial Services: Savings Plans and Payment Accounts

Introduction to Consumer Credit

Choosing a Source of Credit: the Costs of Credit Alternatives

Consumer Purchasing Strategies and Legal Protection

The Housing Decision: Factors and Finances

Property and Motor Vehicle Insurance

Health,disability,and Long-Term Care Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Investing in Real Estate and Other Investment Alternatives

Starting Early: Retirement Planning

Estate Planning

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Exam 15: Investing in Bonds

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

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

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?

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:

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

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

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?

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

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.

Which is true of convertible bonds?

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?

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:

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

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?

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

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

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

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

Investors purchase corporate bonds:

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

Personal Finance Basics and the Time Value of Money

Financial Aspects of Career Planning

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

Financial Services: Savings Plans and Payment Accounts

Introduction to Consumer Credit

Choosing a Source of Credit: the Costs of Credit Alternatives

Consumer Purchasing Strategies and Legal Protection

The Housing Decision: Factors and Finances

Property and Motor Vehicle Insurance

Health,disability,and Long-Term Care Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Investing in Real Estate and Other Investment Alternatives

Starting Early: Retirement Planning

Estate Planning

Filters