Question 1

Investing in bonds gives you the possibility of

Accepted Answer

A) capital gains and interest income. 
B) guaranteed income with no capital risk. 
C) capital gains and dividend income. 
D) deferring taxes on accrued interest. 
A) capital gains and interest income. 
B) guaranteed income with no capital risk. 
C) capital gains and dividend income. 
D) deferring taxes on accrued interest.

Question 2

On the secondary bond market,

Accepted Answer

A) only new bonds can be sold. 
B) bonds are guaranteed to bring at least par value. 
C) bond prices vary with interest rate movement. 
D) bond prices remain constant but yields vary with interest rate movement. 
A) only new bonds can be sold. 
B) bonds are guaranteed to bring at least par value. 
C) bond prices vary with interest rate movement. 
D) bond prices remain constant but yields vary with interest rate movement.

Question 3

Which of the following government of Canada bonds (with all other features the same)would have the most interest rate risk?

Accepted Answer

A) A 3% coupon bond maturing in ten years 
B) A 6% coupon bond maturing in ten years 
C) A 3% coupon bond maturing in five years 
D) A 6% coupon bond maturing in five years 
A) A 3% coupon bond maturing in ten years 
B) A 6% coupon bond maturing in ten years 
C) A 3% coupon bond maturing in five years 
D) A 6% coupon bond maturing in five years

Question 4

A bond with a coupon rate of 6.5 percent and trading at $960 will pay annual interest of $62.40.

Accepted Answer

A) True 
 B)False

Question 5

Convertible bonds are suitable for investors who

Accepted Answer

A) want to maximize interest returns in periods when interest rates are low. 
B) want to convert the bond into a longer term at the same rate of interest. 
C) want the possibility of benefiting from a rise in the issuer's share price. 
D) have a lower risk tolerance and are seeking income. 
A) want to maximize interest returns in periods when interest rates are low. 
B) want to convert the bond into a longer term at the same rate of interest. 
C) want the possibility of benefiting from a rise in the issuer's share price. 
D) have a lower risk tolerance and are seeking income.

Question 6

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 7

The bond par value or face value is the amount the investor will be paid when the bond matures.

Accepted Answer

A) True 
 B)False

Question 8

Other things being equal,in general,which of the following bonds is the lowest-risk bond?

Accepted Answer

A) Aa 
B) AAA 
C) AA 
D) These are the same. 
A) Aa 
B) AAA 
C) AA 
D) These are the same.

Question 9

Investors are willing to purchase bonds with a call feature only if the bonds offer a

Accepted Answer

A) slightly lower return than similar bonds without a call feature. 
B) slightly higher number of shares of the issuer's stock. 
C) slightly higher interest rate than similar bonds without a call feature. 
D) sinking fund provision. 
A) slightly lower return than similar bonds without a call feature. 
B) slightly higher number of shares of the issuer's stock. 
C) slightly higher interest rate than similar bonds without a call feature. 
D) sinking fund provision.

Question 10

A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8844.

Accepted Answer

A) True 
 B)False

Question 11

If an investor is expecting a period of higher interest rates soon,which bond feature would she prefer?

Accepted Answer

A) Callable 
B) Retractable 
C) Convertible 
D) Extendible 
A) Callable 
B) Retractable 
C) Convertible 
D) Extendible

Question 12

Given the following ATT Ltd.bond information: $10 000 par value,maturity Dec 22,2023,semi-annual coupon 7.75 percent,price 105.50 and yield 7.4 percent.How much interest does it pay annually?

Accepted Answer

A) $7.50 
B) $77.50 
C) $7.40 
D) $74.00 
A) $7.50 
B) $77.50 
C) $7.40 
D) $74.00

Question 13

If a company's stock price is expected to increase substantially over the next few years,which of the following may entice potential bondholders to accept a lower coupon rate?

Accepted Answer

A) Extendibility 
B) Call feature 
C) Convertibility 
D) A put feature 
A) Extendibility 
B) Call feature 
C) Convertibility 
D) A put feature

Question 14

Bond interest is exempt from income tax if it is held in an RRSP,a TFSA or an RESP.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) daily rate. 
B) monthly rate. 
C) semi-annual rate. 
D) annual rate. 
A) daily rate. 
B) monthly rate. 
C) semi-annual rate. 
D) annual rate.

Question 16

Your son will be ready for college in 10 years and your daughter in 14 years.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 17

One difference between a regular bond and a convertible bond is that a regular bond has

Accepted Answer

A) a higher interest rate. 
B) a lower interest rate. 
C) a shorter maturity. 
D) a longer maturity. 
A) a higher interest rate. 
B) a lower interest rate. 
C) a shorter maturity. 
D) a longer maturity.

Question 18

The maturity matching strategy of investing in bonds is the surest way to have money available to meet a specific goal.

Accepted Answer

A) True 
 B)False

Question 19

The normal yield curve suggests

Accepted Answer

A) that reinvestment risk is higher for higher coupon rates. 
B) that selecting short-term maturities for borrowing and long term for investing will be profitable. 
C) that interest rate risk is higher for longer-term bonds. 
D) that short-term bonds give the best risk return trade-off. 
A) that reinvestment risk is higher for higher coupon rates. 
B) that selecting short-term maturities for borrowing and long term for investing will be profitable. 
C) that interest rate risk is higher for longer-term bonds. 
D) that short-term bonds give the best risk return trade-off.

Question 20

A retractable bond pays a lower interest rate,all else equal.

Accepted Answer

A) True 
 B)False

Investing in bonds gives you the possibility of

On the secondary bond market,

Which of the following government of Canada bonds (with all other features the same)would have the most interest rate risk?

A bond with a coupon rate of 6.5 percent and trading at $960 will pay annual interest of $62.40.

Convertible bonds are suitable for investors who

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

The bond par value or face value is the amount the investor will be paid when the bond matures.

Other things being equal,in general,which of the following bonds is the lowest-risk bond?

Investors are willing to purchase bonds with a call feature only if the bonds offer a

A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8844.

If an investor is expecting a period of higher interest rates soon,which bond feature would she prefer?

Given the following ATT Ltd.bond information: $10 000 par value,maturity Dec 22,2023,semi-annual coupon 7.75 percent,price 105.50 and yield 7.4 percent.How much interest does it pay annually?

If a company's stock price is expected to increase substantially over the next few years,which of the following may entice potential bondholders to accept a lower coupon rate?

Bond interest is exempt from income tax if it is held in an RRSP,a TFSA or an RESP.

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

Your son will be ready for college in 10 years and your daughter in 14 years.Which of the following bond strategies would be best suited to your goal of financing your children's education?

One difference between a regular bond and a convertible bond is that a regular bond has

The maturity matching strategy of investing in bonds is the surest way to have money available to meet a specific goal.

The normal yield curve suggests

A retractable bond pays a lower interest rate,all else equal.

Overview of a Financial Plan

Tools for Financial Planning - Applying Time Value Concepts

Tools for Financial Planning - Planning with Personal Financial Statements

Tools for Financial Planning - Using Tax Concepts for Planning

Managing Your Financial Resources - Banking Services and Managing Your Money

Managing Your Financial Resources - Assessing, Managing, and Securing Your Credit

Managing Your Financial Resources - Purchasing and Financing a Home

Protecting Your Wealth - Auto and Homeowner's Insurance

Protecting Your Wealth - Health and Life Insurance

Personal Investing - Investing Fundamentals

Personal Investing - Investing in Stocks

Personal Investing - Investing in Mutual Funds

Retirement and Estate Planning - Retirement Planning

Retirement and Estate Planning - Estate Planning

Synthesis of Financial Planning - Integrating the Components of a Financial Plan

Filters

Exam 12: Personal Investing - Investing in Bonds

Investing in bonds gives you the possibility of

On the secondary bond market,

Which of the following government of Canada bonds (with all other features the same)would have the most interest rate risk?

A bond with a coupon rate of 6.5 percent and trading at $960 will pay annual interest of $62.40.

Convertible bonds are suitable for investors who

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

The bond par value or face value is the amount the investor will be paid when the bond matures.

Other things being equal,in general,which of the following bonds is the lowest-risk bond?

Investors are willing to purchase bonds with a call feature only if the bonds offer a

A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8844.

If an investor is expecting a period of higher interest rates soon,which bond feature would she prefer?

Given the following ATT Ltd.bond information: $10 000 par value,maturity Dec 22,2023,semi-annual coupon 7.75 percent,price 105.50 and yield 7.4 percent.How much interest does it pay annually?

If a company's stock price is expected to increase substantially over the next few years,which of the following may entice potential bondholders to accept a lower coupon rate?

Bond interest is exempt from income tax if it is held in an RRSP,a TFSA or an RESP.

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

Your son will be ready for college in 10 years and your daughter in 14 years.Which of the following bond strategies would be best suited to your goal of financing your children's education?

One difference between a regular bond and a convertible bond is that a regular bond has

The maturity matching strategy of investing in bonds is the surest way to have money available to meet a specific goal.

The normal yield curve suggests

A retractable bond pays a lower interest rate,all else equal.

Overview of a Financial Plan

Tools for Financial Planning - Applying Time Value Concepts

Tools for Financial Planning - Planning with Personal Financial Statements

Tools for Financial Planning - Using Tax Concepts for Planning

Managing Your Financial Resources - Banking Services and Managing Your Money

Managing Your Financial Resources - Assessing, Managing, and Securing Your Credit

Managing Your Financial Resources - Purchasing and Financing a Home

Protecting Your Wealth - Auto and Homeowner's Insurance

Protecting Your Wealth - Health and Life Insurance

Personal Investing - Investing Fundamentals

Personal Investing - Investing in Stocks

Personal Investing - Investing in Mutual Funds

Retirement and Estate Planning - Retirement Planning

Retirement and Estate Planning - Estate Planning

Synthesis of Financial Planning - Integrating the Components of a Financial Plan

Filters