Exam 7: Bond Markets

Savings bonds are bonds issued by the Federal Reserve.

A private bond placement has to be registered with the SEC.

A _____ has first claim on specified real property assets, while a _____ is a debenture that has claims against a firm's assets that are junior to the claims of mortgage bonds and regular debentures.

Bonds issued by ____ are backed by the federal government. ​

Which of the following statements is incorrect?

Structured notes are issued by firms to borrow funds, and the amount of interest and principal to be paid is based on specified market conditions.

Rule 144A allows small individual investors to trade privately placed bonds with each other without requiring the firms that issued the securities to register them with the SEC.

The coupon rate of most variable-rate bonds is tied to

Corporate bonds can be placed with investors through a public offering or a private placement.

A 10-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based on this information, the coupon payment after six months will be $____.

If interest rates suddenly decline, those existing bonds that have a call feature are less likely to be called.

A sinking-fund provision is a requirement that the issuing firm retire a certain amount of the bond issue each year.

Zero-coupon bonds do not pay interest. Instead, they are issued at a discount from par value.

A credit rating agency is paid by

The Treasury has relied heavily on ____-year bonds to finance the U.S. budget deficit. ​

Rule 144A creates liquidity for securities that are privately placed.

Bonds are issued in the primary market through a telecommunications network.

Most newly issued municipal bonds are insured because investors are unwilling to purchase uninsured municipal bonds out of fear that the issuer may default.

Devin, a private investor, purchases $1,000 par value bonds with a 12 percent coupon rate and a 9 percent yield to maturity. Devin will hold the bonds until maturity. Thus, he will earn a return of ____ percent.

Bond dealers specialize in small transactions (less than $100,000)in order to enable small investors to trade bonds.