Question 1

The coupon rate of interest on a bond is always stated as a(n)

Accepted Answer

A)  daily rate. 
B)  monthly rate. 
C)  semiannual rate. 
D)  annual rate. 
A)  daily rate. 
B)  monthly rate. 
C)  semiannual rate. 
D)  annual rate. D

Question 2

If a company anticipates a substantial decline in interest rates in the future, which of the following is it likely to include in a bond?

Accepted Answer

A)  Par value 
B)  Call feature 
C)  Convertibility 
D)  Reverse dividend 
A)  Par value 
B)  Call feature 
C)  Convertibility 
D)  Reverse dividend B

Question 3

The advantage of a convertible bond to the investor is

Accepted Answer

A)  higher coupon interest rates. 
B)  ability to "own the upside" if the company performs well. 
C)  convertibility protects the investor if the stock decreases in value. 
D)  None of these are advantages. 
A)  higher coupon interest rates. 
B)  ability to "own the upside" if the company performs well. 
C)  convertibility protects the investor if the stock decreases in value. 
D)  None of these are advantages. B

Question 4

To completely avoid the risk of default, investors can invest in Treasury bonds or A-rated corporate bonds.

Accepted Answer

A) True 
 B)False

Question 5

If a bond can be exchanged for common stock if the stock reaches a specified price, the bond is a(n) ________.

Accepted Answer

The answer of If a bond can be exchanged for...

Question 6

If you expect interest rates to rise over time, you should consider investing in bonds with longer maturities.

Accepted Answer

A) True 
 B)False

Question 7

Calculating the present value of future coupon payments, along with the present value of the principal repayment at maturity, is a good way to determine the value of a bond.

Accepted Answer

A) True 
 B)False

Question 8

Your son will be ready for college in 10 years and your daughter in 15. Which of the following bond strategies would be best suited to your goal of financing your children's education?

Accepted Answer

A)  Interest rate 
B)  Passive 
C)  Maturity matching 
D)  Active 
A)  Interest rate 
B)  Passive 
C)  Maturity matching 
D)  Active

Question 9

The secondary market price of a bond is based on

Accepted Answer

A)  the bond's coupon payments. 
B)  the number of years the bond has until maturity. 
C)  the market interest rate required for bonds of a similar risk and term. 
D)  All of the above are factors in determining the bond's market price. 
A)  the bond's coupon payments. 
B)  the number of years the bond has until maturity. 
C)  the market interest rate required for bonds of a similar risk and term. 
D)  All of the above are factors in determining the bond's market price.

Question 10

A bond's par value or face value is the amount the investor will get paid when the bond matures.

Accepted Answer

A) True 
 B)False

Question 11

Bonds usually pay interest

Accepted Answer

A)  annually. 
B)  semiannually. 
C)  quarterly. 
D)  monthly. 
A)  annually. 
B)  semiannually. 
C)  quarterly. 
D)  monthly.

Question 12

Use the following two columns of items to answer the matching questions below:
-interest rate risk
A)compensation required for default risk
B)risk that a bond's price will decline in response to an increase in interest rates
C)risk that the face value may not be repaid

Accepted Answer

The answer of Use the following two columns of items...

Question 13

A convertible bond allows the investor to exchange that bond for another issue of bonds within the convertible period.

Accepted Answer

A) True 
 B)False

Question 14

Because convertibility is a desirable feature for investors, convertible bonds tend to offer a higher return than nonconvertible bonds.

Accepted Answer

A) True 
 B)False

Question 15

What is the semiannual interest payment on a $1,000 bond with a 7% coupon rate?

Accepted Answer

A)  $70 
B)  $35 
C)  $350 
D)  $700 
A)  $70 
B)  $35 
C)  $350 
D)  $700

Question 16

Use the following two columns of items to answer the matching questions below:
-convertible bonds
A)annualized return on a bond if held to maturity
B)par value or the amount returned to the investor at maturity
C)bonds that can be converted into stock
D)long-term securities issued by government agencies or corporations

Accepted Answer

The answer of Use the following two columns of items...

Question 17

The possibility that a bond will be called by the corporation prior to its maturity is an example of ________ risk.

Accepted Answer

The answer of The possibility that a bond will be...

Question 18

A $1,000 bond with a coupon rate of 6.5% has a market price of $950. What is the current yield?

Accepted Answer

A)  6.5% 
B)  6.8% 
C)  7.0% 
D)  6.2% 
A)  6.5% 
B)  6.8% 
C)  7.0% 
D)  6.2%

Question 19

Which of the following is not always a true statement?

Accepted Answer

A)  The par value of a bond is its face value. 
B)  The par value of a bond is its market value. 
C)  The par value of a bond will be paid to the bondholder at maturity. 
D)  The par value multiplied by the coupon rate equals the interest paid to investors annually. 
A)  The par value of a bond is its face value. 
B)  The par value of a bond is its market value. 
C)  The par value of a bond will be paid to the bondholder at maturity. 
D)  The par value multiplied by the coupon rate equals the interest paid to investors annually.

Question 20

Callable bonds are issued when interest rates are expected to

Accepted Answer

A)  stay the same. 
B)  decline. 
C)  rise. 
D)  None of the above. 
A)  stay the same. 
B)  decline. 
C)  rise. 
D)  None of the above.

The coupon rate of interest on a bond is always stated as a(n)

If a company anticipates a substantial decline in interest rates in the future, which of the following is it likely to include in a bond?

The advantage of a convertible bond to the investor is

To completely avoid the risk of default, investors can invest in Treasury bonds or A-rated corporate bonds.

If a bond can be exchanged for common stock if the stock reaches a specified price, the bond is a(n) ________.

If you expect interest rates to rise over time, you should consider investing in bonds with longer maturities.

Calculating the present value of future coupon payments, along with the present value of the principal repayment at maturity, is a good way to determine the value of a bond.

Your son will be ready for college in 10 years and your daughter in 15. Which of the following bond strategies would be best suited to your goal of financing your children's education?

The secondary market price of a bond is based on

A bond's par value or face value is the amount the investor will get paid when the bond matures.

Bonds usually pay interest

Use the following two columns of items to answer the matching questions below: -interest rate risk A)compensation required for default risk B)risk that a bond's price will decline in response to an increase in interest rates C)risk that the face value may not be repaid

A convertible bond allows the investor to exchange that bond for another issue of bonds within the convertible period.

Because convertibility is a desirable feature for investors, convertible bonds tend to offer a higher return than nonconvertible bonds.

What is the semiannual interest payment on a $1,000 bond with a 7% coupon rate?

The possibility that a bond will be called by the corporation prior to its maturity is an example of ________ risk.

A $1,000 bond with a coupon rate of 6.5% has a market price of $950. What is the current yield?

Which of the following is not always a true statement?

Callable bonds are issued when interest rates are expected to

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

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Investing in Mutual Funds

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Exam 16: Investing in Bonds

The coupon rate of interest on a bond is always stated as a(n)

If a company anticipates a substantial decline in interest rates in the future, which of the following is it likely to include in a bond?

The advantage of a convertible bond to the investor is

To completely avoid the risk of default, investors can invest in Treasury bonds or A-rated corporate bonds.

If a bond can be exchanged for common stock if the stock reaches a specified price, the bond is a(n) ________.

If you expect interest rates to rise over time, you should consider investing in bonds with longer maturities.

Calculating the present value of future coupon payments, along with the present value of the principal repayment at maturity, is a good way to determine the value of a bond.

Your son will be ready for college in 10 years and your daughter in 15. Which of the following bond strategies would be best suited to your goal of financing your children's education?

The secondary market price of a bond is based on

A bond's par value or face value is the amount the investor will get paid when the bond matures.

Bonds usually pay interest

Use the following two columns of items to answer the matching questions below: -interest rate risk A)compensation required for default risk B)risk that a bond's price will decline in response to an increase in interest rates C)risk that the face value may not be repaid

A convertible bond allows the investor to exchange that bond for another issue of bonds within the convertible period.

Because convertibility is a desirable feature for investors, convertible bonds tend to offer a higher return than nonconvertible bonds.

What is the semiannual interest payment on a $1,000 bond with a 7% coupon rate?

The possibility that a bond will be called by the corporation prior to its maturity is an example of ________ risk.

A $1,000 bond with a coupon rate of 6.5% has a market price of $950. What is the current yield?

Which of the following is not always a true statement?

Callable bonds are issued when interest rates are expected to

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters