Question 1

When a bond is described as AA, what does this refer to?

Accepted Answer

A)  A bond that has above average coupon payments. 
B)  A bond that has above average yield to maturity. 
C)  A bond rating of "very strong" capacity to pay interest and principle repayment 
D)  All of the above are correct. 
E)  Only A and C are correct. 
A)  A bond that has above average coupon payments. 
B)  A bond that has above average yield to maturity. 
C)  A bond rating of "very strong" capacity to pay interest and principle repayment 
D)  All of the above are correct. 
E)  Only A and C are correct.

Question 2

The long-term bond you own was issued by IBM Corporation and used no collateral. This is an example of a(n) ________.

Accepted Answer

A)  unsecured mortgage 
B)  credit 
C)  debenture 
D)  nomenclature 
E)  none of the above 
A)  unsecured mortgage 
B)  credit 
C)  debenture 
D)  nomenclature 
E)  none of the above

Question 3

Bond issuers may do something very important for the bondholder that increases the probability the debt will be successfully paid off at maturity. The issuer

Accepted Answer

A)  establishes a sinking fund. 
B)  sets a fixed interest rate. 
C)  has the bond indentured. 
D)  has the bond deferred. 
A)  establishes a sinking fund. 
B)  sets a fixed interest rate. 
C)  has the bond indentured. 
D)  has the bond deferred.

Question 4

How would you go about rating bonds as a possible investment?

Accepted Answer

First, compare the bond yield, consistin

Question 5

A real estate investment that is most similar to a mutual fund specializing in real estate investment is called a ________.

Accepted Answer

A)  real estate agency bond 
B)  pass-through property bond 
C)  property trust 
D)  real estate investment trust. 
E)  none of the above 
A)  real estate agency bond 
B)  pass-through property bond 
C)  property trust 
D)  real estate investment trust. 
E)  none of the above

Question 6

What risks are you assuming with preferred stock that you would not have with common stock and bonds? Be specific.

Accepted Answer

When interest rates rise, the value of t

Question 7

When a bond is bought at a discount price below its par value, the current yield will be higher than the coupon rate.

Accepted Answer

A) True 
 B)False

Question 8

A corporate bond with a face value of $1,000 is currently selling at par, and pays an 8% yield to maturity. Which of the following statements concerning this bond is true?

Accepted Answer

A)  Its current market price is $1,000. 
B)  Its current semi-annual coupon payment is $40. 
C)  Its current yield is 8%. 
D)  All of the above are correct. 
E)  Only B and C are correct. 
A)  Its current market price is $1,000. 
B)  Its current semi-annual coupon payment is $40. 
C)  Its current yield is 8%. 
D)  All of the above are correct. 
E)  Only B and C are correct.

Question 9

Herman Melville never thought of a bond as being a ________ and that he would be a ________ when securing one until he read about it in his personal finance text.

Accepted Answer

A)  lien; borrower 
B)  loan; borrower 
C)  loan; lender 
D)  lien; debenture 
E)  lien; lender 
A)  lien; borrower 
B)  loan; borrower 
C)  loan; lender 
D)  lien; debenture 
E)  lien; lender

Question 10

What is the value of a $1,000 par value bond with a 12% annual coupon that will mature in 5 years if the bond is currently priced to yield 10%?

Accepted Answer

A)  $955.76 
B)  $1,000.00 
C)  $1,075.82 
D)  $1,158.52 
A)  $955.76 
B)  $1,000.00 
C)  $1,075.82 
D)  $1,158.52

Question 11

What are the major differences between preferred stock and common stock?

Accepted Answer

A)  Preferred stock dividends are paid out before dividends on common stock can be issued. 
B)  Common stock has voting rights and preferred stock does not. 
C)  Common stock has potentially higher capital gains than preferred stock. 
D)  All of the above are correct. 
E)  Only A and B are correct. 
A)  Preferred stock dividends are paid out before dividends on common stock can be issued. 
B)  Common stock has voting rights and preferred stock does not. 
C)  Common stock has potentially higher capital gains than preferred stock. 
D)  All of the above are correct. 
E)  Only A and B are correct.

Question 12

A bond with a speculative rating will have which of the following characteristics?

Accepted Answer

A)  A high coupon yield. 
B)  A high yield to maturity. 
C)  Double BB or lower rating. 
D)  All of the above are correct. 
E)  Only A and B are correct. 
A)  A high coupon yield. 
B)  A high yield to maturity. 
C)  Double BB or lower rating. 
D)  All of the above are correct. 
E)  Only A and B are correct.

Question 13

When is it OK to speculate?

Accepted Answer

It is OK to speculate when you have some

Question 14

Bonds enjoy all but one of the following advantages. Which is it?

Accepted Answer

A)  When interest rates drop, bond prices rise. 
B)  Bonds may be called when interest rates drop. 
C)  They reduce risk through diversification. 
D)  Bonds produce steady income. 
E)  They can be a safe investment if held to maturity. 
A)  When interest rates drop, bond prices rise. 
B)  Bonds may be called when interest rates drop. 
C)  They reduce risk through diversification. 
D)  Bonds produce steady income. 
E)  They can be a safe investment if held to maturity.

Question 15

Pedro is trying to take advantage of the bond valuation relationships. He has figured out that when you expect interest rates to go up, buy ________ bonds and when you expect interest rates to go down, buy ________.

Accepted Answer

A)  government bonds; short-term bonds 
B)  interest-indexed bonds; long-term bonds 
C)  very long-term; bonds with very short-term maturities that are not callable 
D)  very short-term; bonds with very long-term maturities that are not callable 
E)  interest-proof; long-term bonds 
A)  government bonds; short-term bonds 
B)  interest-indexed bonds; long-term bonds 
C)  very long-term; bonds with very short-term maturities that are not callable 
D)  very short-term; bonds with very long-term maturities that are not callable 
E)  interest-proof; long-term bonds

Question 16

What is the purpose of the sinking fund?

Accepted Answer

A)  To force the issuing company to save money to retire the bonds at maturity. 
B)  To raise outside capital to sink back into the company. 
C)  To cause the coupon rate to increase. 
D)  None of the above is correct. 
A)  To force the issuing company to save money to retire the bonds at maturity. 
B)  To raise outside capital to sink back into the company. 
C)  To cause the coupon rate to increase. 
D)  None of the above is correct.

Question 17

Gold and precious gems should hold a place in any diversified retirement portfolio.

Accepted Answer

A) True 
 B)False

Question 18

A bond's yield is always exactly the same as its coupon interest rate.

Accepted Answer

A) True 
 B)False

Question 19

Provide an explanation of the basic bond terminology and features.

Accepted Answer

A bond has a par value, or face value, w

Question 20

The novice investor can easily make big returns investing in real estate.

Accepted Answer

A) True 
 B)False

When a bond is described as AA, what does this refer to?

The long-term bond you own was issued by IBM Corporation and used no collateral. This is an example of a(n) ________.

Bond issuers may do something very important for the bondholder that increases the probability the debt will be successfully paid off at maturity. The issuer

How would you go about rating bonds as a possible investment?

A real estate investment that is most similar to a mutual fund specializing in real estate investment is called a ________.

What risks are you assuming with preferred stock that you would not have with common stock and bonds? Be specific.

When a bond is bought at a discount price below its par value, the current yield will be higher than the coupon rate.

A corporate bond with a face value of $1,000 is currently selling at par, and pays an 8% yield to maturity. Which of the following statements concerning this bond is true?

Herman Melville never thought of a bond as being a and that he would be a when securing one until he read about it in his personal finance text.

What is the value of a $1,000 par value bond with a 12% annual coupon that will mature in 5 years if the bond is currently priced to yield 10%?

What are the major differences between preferred stock and common stock?

A bond with a speculative rating will have which of the following characteristics?

When is it OK to speculate?

Bonds enjoy all but one of the following advantages. Which is it?

Pedro is trying to take advantage of the bond valuation relationships. He has figured out that when you expect interest rates to go up, buy bonds and when you expect interest rates to go down, buy .

What is the purpose of the sinking fund?

Gold and precious gems should hold a place in any diversified retirement portfolio.

A bond's yield is always exactly the same as its coupon interest rate.

Provide an explanation of the basic bond terminology and features.

The novice investor can easily make big returns investing in real estate.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters

Exam 14: Investing in Bonds and Other Alternatives

When a bond is described as AA, what does this refer to?

The long-term bond you own was issued by IBM Corporation and used no collateral. This is an example of a(n) ________.

Bond issuers may do something very important for the bondholder that increases the probability the debt will be successfully paid off at maturity. The issuer

How would you go about rating bonds as a possible investment?

A real estate investment that is most similar to a mutual fund specializing in real estate investment is called a ________.

What risks are you assuming with preferred stock that you would not have with common stock and bonds? Be specific.

When a bond is bought at a discount price below its par value, the current yield will be higher than the coupon rate.

A corporate bond with a face value of $1,000 is currently selling at par, and pays an 8% yield to maturity. Which of the following statements concerning this bond is true?

Herman Melville never thought of a bond as being a ________ and that he would be a ________ when securing one until he read about it in his personal finance text.

What is the value of a $1,000 par value bond with a 12% annual coupon that will mature in 5 years if the bond is currently priced to yield 10%?

What are the major differences between preferred stock and common stock?

A bond with a speculative rating will have which of the following characteristics?

When is it OK to speculate?

Bonds enjoy all but one of the following advantages. Which is it?

Pedro is trying to take advantage of the bond valuation relationships. He has figured out that when you expect interest rates to go up, buy ________ bonds and when you expect interest rates to go down, buy ________.

What is the purpose of the sinking fund?

Gold and precious gems should hold a place in any diversified retirement portfolio.

A bond's yield is always exactly the same as its coupon interest rate.

Provide an explanation of the basic bond terminology and features.

The novice investor can easily make big returns investing in real estate.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Investment Basics

Securities Markets

Investing in Stocks

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters

Herman Melville never thought of a bond as being a and that he would be a when securing one until he read about it in his personal finance text.

Pedro is trying to take advantage of the bond valuation relationships. He has figured out that when you expect interest rates to go up, buy bonds and when you expect interest rates to go down, buy .