Question 1

Fluctuating interest rates lead to varying asset prices.

Accepted Answer

A)  Exchange rate risk 
B)  Political risk 
C)  Rollover risk 
D)  Interest rate risk 
A)  Exchange rate risk 
B)  Political risk 
C)  Rollover risk 
D)  Interest rate risk

Question 2

Bonds that are generally denominated in U.S. dollars and marketed globally.

Accepted Answer

A)  Bearer bonds 
B)  Global bonds 
C)  Eurodollar bonds 
D)  Yankee bonds 
A)  Bearer bonds 
B)  Global bonds 
C)  Eurodollar bonds 
D)  Yankee bonds

Question 3

A sinking fund:

Accepted Answer

A)  is a special fund set up to pay of the creditors of bankrupt firms 
B)  requires specific approval by the firm's the board of directors 
C)  requires the issuer to retire a bond issue incrementally over time 
D)  is managed by the trustee 
A)  is a special fund set up to pay of the creditors of bankrupt firms 
B)  requires specific approval by the firm's the board of directors 
C)  requires the issuer to retire a bond issue incrementally over time 
D)  is managed by the trustee

Question 4

Treasury Inflation Protected Securities have a principal value that changes in accordance with the consumer price index (CPI).

Accepted Answer

A) True 
 B)False

Question 5

Remaining yield is the return on a bond if it is held to maturity.

Accepted Answer

A) True 
 B)False

Question 6

Many investors find it convenient to keep their stock holdings in street name.

Accepted Answer

A) True 
 B)False

Question 7

Many firms have low or no-par stock.

Accepted Answer

A) True 
 B)False

Question 8

What is the value of HM stock which currently has a dividend of $2 and is growing at 7 percent? The investor's required rate of return is 11 percent.

Accepted Answer

A)  $46.25 
B)  $50.50 
C)  $52.75 
D)  53.50 
A)  $46.25 
B)  $50.50 
C)  $52.75 
D)  53.50

Question 9

ADRs, or American Depository Receipts, which are traded on U.S. exchanges, represent shares of common stock that trade on foreign exchanges.

Accepted Answer

A) True 
 B)False

Question 10

Eurodollar bonds are highly regulated by the SEC.

Accepted Answer

A) True 
 B)False

Question 11

For foreign firms to issue preferred stock, they must do so in the United States.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not an advantage of owning debt securities?

Accepted Answer

A)  high claim on cash flows of a firm 
B)  highest return of corporate securities 
C)  high claim on assets of in liquidation 
D)  may be convertible into equity 
A)  high claim on cash flows of a firm 
B)  highest return of corporate securities 
C)  high claim on assets of in liquidation 
D)  may be convertible into equity

Question 13

Equipment trust bonds are a type of mortgage bond that gives the bondholder a claim to specific "rolling stock."

Accepted Answer

A) True 
 B)False

Question 14

Financial assets are claims against the income or assets of individuals, businesses, and governments.

Accepted Answer

A) True 
 B)False

Question 15

When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced:

Accepted Answer

A)  below its par value 
B)  at its par value 
C)  above its par value 
D)  The bond price cannot be determined 
A)  below its par value 
B)  at its par value 
C)  above its par value 
D)  The bond price cannot be determined

Question 16

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Accepted Answer

A) True 
 B)False

Question 17

Which type of bond is currently prohibited from being issued in the United States?

Accepted Answer

A)  bearer bonds 
B)  unregulated debentures 
C)  tax avoidance bonds 
D)  income bonds 
A)  bearer bonds 
B)  unregulated debentures 
C)  tax avoidance bonds 
D)  income bonds

Question 18

Bonds rated BB+ by Standard & Poors and Fitch are considered to be great investments.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a bond rating agency?

Accepted Answer

A)  Standard and Poor's 
B)  Fitch's 
C)  Moody's 
D)  Wilkes Bashford 
A)  Standard and Poor's 
B)  Fitch's 
C)  Moody's 
D)  Wilkes Bashford

Question 20

An unrated bond:

Accepted Answer

A)  is perceived as having lower than average risk 
B)  are termed as "debentures" 
C)  generally has a lower yield than rated bonds 
D)  has not been rated by a rating agency 
A)  is perceived as having lower than average risk 
B)  are termed as "debentures" 
C)  generally has a lower yield than rated bonds 
D)  has not been rated by a rating agency

Fluctuating interest rates lead to varying asset prices.

Bonds that are generally denominated in U.S. dollars and marketed globally.

A sinking fund:

Treasury Inflation Protected Securities have a principal value that changes in accordance with the consumer price index (CPI).

Remaining yield is the return on a bond if it is held to maturity.

Many investors find it convenient to keep their stock holdings in street name.

Many firms have low or no-par stock.

What is the value of HM stock which currently has a dividend of $2 and is growing at 7 percent? The investor's required rate of return is 11 percent.

ADRs, or American Depository Receipts, which are traded on U.S. exchanges, represent shares of common stock that trade on foreign exchanges.

Eurodollar bonds are highly regulated by the SEC.

For foreign firms to issue preferred stock, they must do so in the United States.

Which of the following is not an advantage of owning debt securities?

Equipment trust bonds are a type of mortgage bond that gives the bondholder a claim to specific "rolling stock."

Financial assets are claims against the income or assets of individuals, businesses, and governments.

When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced:

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Which type of bond is currently prohibited from being issued in the United States?

Bonds rated BB+ by Standard & Poors and Fitch are considered to be great investments.

Which of the following is not a bond rating agency?

An unrated bond:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 10: Bonds and Stocks: Characteristics and Valuations

Fluctuating interest rates lead to varying asset prices.

Bonds that are generally denominated in U.S. dollars and marketed globally.

A sinking fund:

Treasury Inflation Protected Securities have a principal value that changes in accordance with the consumer price index (CPI).

Remaining yield is the return on a bond if it is held to maturity.

Many investors find it convenient to keep their stock holdings in street name.

Many firms have low or no-par stock.

What is the value of HM stock which currently has a dividend of $2 and is growing at 7 percent? The investor's required rate of return is 11 percent.

ADRs, or American Depository Receipts, which are traded on U.S. exchanges, represent shares of common stock that trade on foreign exchanges.

Eurodollar bonds are highly regulated by the SEC.

For foreign firms to issue preferred stock, they must do so in the United States.

Which of the following is not an advantage of owning debt securities?

Equipment trust bonds are a type of mortgage bond that gives the bondholder a claim to specific "rolling stock."

Financial assets are claims against the income or assets of individuals, businesses, and governments.

When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced:

A trustee represents the company to ensure that the covenants of the bond indenture are met.

Which type of bond is currently prohibited from being issued in the United States?

Bonds rated BB+ by Standard & Poors and Fitch are considered to be great investments.

Which of the following is not a bond rating agency?

An unrated bond:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters