Question 1

A $1,000 Treasury note has 4.5 years left to maturity, a yield to maturity of 4.25%, and a coupon rate of 4.50%. What is the price of the bond?

Accepted Answer

A) $1,007.83 
B) $1,008.53 
C) $1,009.56 
D) $1,010.14 
E) $1,011.96 
A) $1,007.83 
B) $1,008.53 
C) $1,009.56 
D) $1,010.14 
E) $1,011.96

Question 2

A Treasury bond has a face value of $25,000 and a quoted price of 103.3750. What is the bond's dollar price?

Accepted Answer

A) $25,033.75 
B) $25,103.38 
C) $25,656.25 
D) $25,843.75 
E) $26,475.00 
A) $25,033.75 
B) $25,103.38 
C) $25,656.25 
D) $25,843.75 
E) $26,475.00

Question 3

Which of the following uses of proceeds from private activity bonds will most likely qualify those bonds as federally tax-exempt?
I. public airport runway
II. baseball stadium
III. multifamily housing project
IV. mass rail transit

Accepted Answer

A) I and II only 
B) I and III only 
C) II and III only 
D) II and IV only 
E) I, III, and IV only 
A) I and II only 
B) I and III only 
C) II and III only 
D) II and IV only 
E) I, III, and IV only

Question 4

Which one of these statements regarding corporate bond credit ratings is correct?

Accepted Answer

A) Bonds rated Ba3 or above by Moody's are considered investment-grade bonds. 
B) All bonds issued by the same issuer will have the same credit rating. 
C) A bond's credit spread may be a better indicator of a bond's risk than its rating. 
D) Bond ratings are based solely on the seniority of the bond issue and the protective covenants by which it is covered. 
E) Credit ratings are assigned to the bond issuer, not the bond issue. 
A) Bonds rated Ba3 or above by Moody's are considered investment-grade bonds. 
B) All bonds issued by the same issuer will have the same credit rating. 
C) A bond's credit spread may be a better indicator of a bond's risk than its rating. 
D) Bond ratings are based solely on the seniority of the bond issue and the protective covenants by which it is covered. 
E) Credit ratings are assigned to the bond issuer, not the bond issue.

Question 5

A STRIPS matures in 7 years, has a face value of $17,000, and has a yield to maturity of 3.5%. What is the price?

Accepted Answer

A) $11,854.59 
B) $12,366.53 
C) $12,684.75 
D) $13,122.01 
E) $13,334.20 
A) $11,854.59 
B) $12,366.53 
C) $12,684.75 
D) $13,122.01 
E) $13,334.20

Question 6

Municipal bonds are yielding 4.4% if they are insured and 4.7% if they are uninsured. Your marginal tax rate is 28%. Your equivalent taxable yield on the insured bonds is ________% and on the uninsured bonds is ________ %.

Accepted Answer

A) 5.89; 6.27 
B) 6.11; 6.53 
C) 6.31; 6.81 
D) 6.67; 7.10 
E) 6.76; 7.10 
A) 5.89; 6.27 
B) 6.11; 6.53 
C) 6.31; 6.81 
D) 6.67; 7.10 
E) 6.76; 7.10

Question 7

A $1,000 par value bond has a market price of $972 and a conversion ratio of 15. The stock is selling for $60.21. What is the conversion value?

Accepted Answer

A) $903.15 
B) $911.10 
C) $925.65 
D) $938.40 
E) $946.47 
A) $903.15 
B) $911.10 
C) $925.65 
D) $938.40 
E) $946.47

Question 8

During a bankruptcy proceeding, Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid. What type of bond is Bond A?

Accepted Answer

A) plain vanilla bond 
B) senior trust bond 
C) junior trust bond 
D) subordinated debenture 
E) senior debenture 
A) plain vanilla bond 
B) senior trust bond 
C) junior trust bond 
D) subordinated debenture 
E) senior debenture

Question 9

Which one of the following statements related to a put bond is correct?

Accepted Answer

A) Put bonds are generally redeemed at a premium over par value. 
B) Put bonds can be redeemed at any time once the put protection period has elapsed. 
C) The put feature effectively sets the ceiling price for the bond. 
D) The put feature helps protect bondholders from the risks associated with rising interest rates. 
E) A putable bond is generally priced lower than a comparable nonputable bond. 
A) Put bonds are generally redeemed at a premium over par value. 
B) Put bonds can be redeemed at any time once the put protection period has elapsed. 
C) The put feature effectively sets the ceiling price for the bond. 
D) The put feature helps protect bondholders from the risks associated with rising interest rates. 
E) A putable bond is generally priced lower than a comparable nonputable bond.

Question 10

A bond is currently priced at $1,110.38 and has a par value of $1,000. If the conversion ratio is 25, what is the conversion price?

Accepted Answer

A) $35.71 
B) $37.04 
C) $38.46 
D) $40.00 
E) $41.67 
A) $35.71 
B) $37.04 
C) $38.46 
D) $40.00 
E) $41.67

Question 11

How much will you be paid if you own a bond that is called under a make-whole call provision?

Accepted Answer

A) the face value 
B) an amount equal to the par value plus the total amount of the remaining interest payments 
C) the present value of all future bond payments that will not be paid because of the call 
D) the current market value plus a prespecified call premium 
E) an amount equal to the normal maturity value of the bond 
A) the face value 
B) an amount equal to the par value plus the total amount of the remaining interest payments 
C) the present value of all future bond payments that will not be paid because of the call 
D) the current market value plus a prespecified call premium 
E) an amount equal to the normal maturity value of the bond

Question 12

After the call protection period, which one of the following serves as an effective upper price limit on a callable bond?

Accepted Answer

A) present value of all future bond payments discounted at the current market rate of interest 
B) face value of the bond 
C) call price of the bond 
D) current market price of the bond 
E) current market price of a comparable noncallable bond 
A) present value of all future bond payments discounted at the current market rate of interest 
B) face value of the bond 
C) call price of the bond 
D) current market price of the bond 
E) current market price of a comparable noncallable bond

Question 13

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

Accepted Answer

A) indenture summary 
B) financial disclosure 
C) covenant agreement 
D) security agreement 
E) trust agreement 
A) indenture summary 
B) financial disclosure 
C) covenant agreement 
D) security agreement 
E) trust agreement

Question 14

What price will a noncompetitive bidder pay for a security being purchased through a U.S. Treasury auction?

Accepted Answer

A) highest competitive bid price 
B) highest noncompetitive bid price 
C) stop-out bid price 
D) average of all bid prices 
E) lowest competitive bid price 
A) highest competitive bid price 
B) highest noncompetitive bid price 
C) stop-out bid price 
D) average of all bid prices 
E) lowest competitive bid price

Question 15

Kathy lives in State A and owns a municipal bond issued by State B. The interest earned on this bond is most likely to be exempt from taxation at which of the following levels?

Accepted Answer

A) local only 
B) state only 
C) federal only 
D) local and state only 
E) federal, state, and local 
A) local only 
B) state only 
C) federal only 
D) local and state only 
E) federal, state, and local

Question 16

A moral obligation bond is which type of a bond?

Accepted Answer

A) municipal revenue 
B) municipal GO 
C) municipal hybrid 
D) U.S. Treasury 
E) U.S. agency 
A) municipal revenue 
B) municipal GO 
C) municipal hybrid 
D) U.S. Treasury 
E) U.S. agency

Question 17

The Federal Reserve is offering Treasury bills with a par value of $50 billion for sale. They have received $22 billion of noncompetitive bids. The competitive bids for a $10,000 par value bond are:
$\begin{array}{cccc}
 \text { dder } & \text { Pric  Bid } & & \text { Oty } & \text { Bid } \
\text { A } & \$  9,900 & \$ & 13 & \text { billion} \
 \text { B } & \$  9,850 & \$ & 9 & \text {billion } \
 \mathrm{C} & \$  9,820 & \$ & 6 & \text { billion} \
 \text { D } & \$  9,750 & \$ & 9& \text { billion}
\end{array}$

How much money will the Federal Reserve raise from this offering?

Accepted Answer

A) $49.05 billion 
B) $49.10 billion 
C) $49.20 billion 
D) $49.30 billion 
E) $49.50 billion 
A) $49.05 billion 
B) $49.10 billion 
C) $49.20 billion 
D) $49.30 billion 
E) $49.50 billion

Question 18

Which of the following features apply to T-bills?
I. original maturities of 4, 13, or 26 weeks
II. minimum face value of $10,000
III. sold at a discount
IV. semiannual interest payments

Accepted Answer

A) IV only 
B) I and III only 
C) I and IV only 
D) II and III only 
E) II and IV only 
A) IV only 
B) I and III only 
C) I and IV only 
D) II and III only 
E) II and IV only

Question 19

A bond has a conversion price of $47.62, a par value of $1,000, and a market price of $833.40. What is the conversion ratio?

Accepted Answer

A) 20 
B) 21 
C) 22 
D) 23 
E) 24 
A) 20 
B) 21 
C) 22 
D) 23 
E) 24

Question 20

Sonya has a marginal tax rate of 38%. A corporate bond is yielding 5.4% and a municipal bond is yielding 2.1%. Sonya should invest in the ________ bond because the critical marginal tax rate is ________ %.

Accepted Answer

A) corporate; 51 
B) corporate; 61 
C) corporate; 71 
D) municipal; 51 
E) municipal; 61 
A) corporate; 51 
B) corporate; 61 
C) corporate; 71 
D) municipal; 51 
E) municipal; 61

A $1,000 Treasury note has 4.5 years left to maturity, a yield to maturity of 4.25%, and a coupon rate of 4.50%. What is the price of the bond?

A Treasury bond has a face value of $25,000 and a quoted price of 103.3750. What is the bond's dollar price?

Which of the following uses of proceeds from private activity bonds will most likely qualify those bonds as federally tax-exempt? I. public airport runway II. baseball stadium III. multifamily housing project IV. mass rail transit

Which one of these statements regarding corporate bond credit ratings is correct?

A STRIPS matures in 7 years, has a face value of $17,000, and has a yield to maturity of 3.5%. What is the price?

Municipal bonds are yielding 4.4% if they are insured and 4.7% if they are uninsured. Your marginal tax rate is 28%. Your equivalent taxable yield on the insured bonds is % and on the uninsured bonds is %.

A $1,000 par value bond has a market price of $972 and a conversion ratio of 15. The stock is selling for $60.21. What is the conversion value?

During a bankruptcy proceeding, Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid. What type of bond is Bond A?

Which one of the following statements related to a put bond is correct?

A bond is currently priced at $1,110.38 and has a par value of $1,000. If the conversion ratio is 25, what is the conversion price?

How much will you be paid if you own a bond that is called under a make-whole call provision?

After the call protection period, which one of the following serves as an effective upper price limit on a callable bond?

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

What price will a noncompetitive bidder pay for a security being purchased through a U.S. Treasury auction?

Kathy lives in State A and owns a municipal bond issued by State B. The interest earned on this bond is most likely to be exempt from taxation at which of the following levels?

A moral obligation bond is which type of a bond?

Which of the following features apply to T-bills? I. original maturities of 4, 13, or 26 weeks II. minimum face value of $10,000 III. sold at a discount IV. semiannual interest payments

A bond has a conversion price of $47.62, a par value of $1,000, and a market price of $833.40. What is the conversion ratio?

Sonya has a marginal tax rate of 38%. A corporate bond is yielding 5.4% and a municipal bond is yielding 2.1%. Sonya should invest in the bond because the critical marginal tax rate is %.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Exam 18: Corporate and Government Bonds

A $1,000 Treasury note has 4.5 years left to maturity, a yield to maturity of 4.25%, and a coupon rate of 4.50%. What is the price of the bond?

A Treasury bond has a face value of $25,000 and a quoted price of 103.3750. What is the bond's dollar price?

Which of the following uses of proceeds from private activity bonds will most likely qualify those bonds as federally tax-exempt? I. public airport runway II. baseball stadium III. multifamily housing project IV. mass rail transit

Which one of these statements regarding corporate bond credit ratings is correct?

A STRIPS matures in 7 years, has a face value of $17,000, and has a yield to maturity of 3.5%. What is the price?

Municipal bonds are yielding 4.4% if they are insured and 4.7% if they are uninsured. Your marginal tax rate is 28%. Your equivalent taxable yield on the insured bonds is ________% and on the uninsured bonds is ________ %.

A $1,000 par value bond has a market price of $972 and a conversion ratio of 15. The stock is selling for $60.21. What is the conversion value?

During a bankruptcy proceeding, Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid. What type of bond is Bond A?

Which one of the following statements related to a put bond is correct?

A bond is currently priced at $1,110.38 and has a par value of $1,000. If the conversion ratio is 25, what is the conversion price?

How much will you be paid if you own a bond that is called under a make-whole call provision?

After the call protection period, which one of the following serves as an effective upper price limit on a callable bond?

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

What price will a noncompetitive bidder pay for a security being purchased through a U.S. Treasury auction?

Kathy lives in State A and owns a municipal bond issued by State B. The interest earned on this bond is most likely to be exempt from taxation at which of the following levels?

A moral obligation bond is which type of a bond?

Which of the following features apply to T-bills? I. original maturities of 4, 13, or 26 weeks II. minimum face value of $10,000 III. sold at a discount IV. semiannual interest payments

A bond has a conversion price of $47.62, a par value of $1,000, and a market price of $833.40. What is the conversion ratio?

Sonya has a marginal tax rate of 38%. A corporate bond is yielding 5.4% and a municipal bond is yielding 2.1%. Sonya should invest in the ________ bond because the critical marginal tax rate is ________ %.

A Brief History of Risk and Return

The Investment Process

Overview of Security Tips

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return, Risk, and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Alternative Investments

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters

Municipal bonds are yielding 4.4% if they are insured and 4.7% if they are uninsured. Your marginal tax rate is 28%. Your equivalent taxable yield on the insured bonds is % and on the uninsured bonds is %.

Sonya has a marginal tax rate of 38%. A corporate bond is yielding 5.4% and a municipal bond is yielding 2.1%. Sonya should invest in the bond because the critical marginal tax rate is %.