Question 1

In the Treasury bill quote that follows, the price of the bill can be calculated from the ____ price.

Accepted Answer

A)  bid 
B)  asked 
C)  yield 
D)  none of the above 
A)  bid 
B)  asked 
C)  yield 
D)  none of the above

Question 2

The call feature is an advantage to the issuing firm

Accepted Answer

A)  if the bond has a floating rate 
B)  if interest rates decline 
C)  if the bond has a low par value 
D)  if interest rates increase 
A)  if the bond has a floating rate 
B)  if interest rates decline 
C)  if the bond has a low par value 
D)  if interest rates increase

Question 3

In reading price quotes on U.S. Treasury bills, you would ____ expect to find the "asked" price higher than the "bid".

Accepted Answer

A)  always 
B)  never 
C)  sometimes 
D)  seldom 
A)  always 
B)  never 
C)  sometimes 
D)  seldom

Question 4

What is the collateral used in collateral trust bonds and who is its primary user?

Accepted Answer

Collateral trust bonds are backed by sto

Question 5

The value of a 15-year bond will change ____ for a given change in the required rate of return than the value of a 5 year bond.

Accepted Answer

A)  more 
B)  less 
C)  the same percentage 
D)  exactly the same 
A)  more 
B)  less 
C)  the same percentage 
D)  exactly the same

Question 6

Potential sellers of an asset can be represented as a ____ schedule showing the ____ prices at which they are willing to sell given quantities of the asset.

Accepted Answer

A)  supply, maximum 
B)  demand, maximum 
C)  supply, minimum 
D)  supply, average 
A)  supply, maximum 
B)  demand, maximum 
C)  supply, minimum 
D)  supply, average

Question 7

"Junk bond" is a term used to describe a bond that

Accepted Answer

A)  is in default 
B)  is rated Ba or lower 
C)  is currently paying interest 
D)  has been downgraded by Moody's 
A)  is in default 
B)  is rated Ba or lower 
C)  is currently paying interest 
D)  has been downgraded by Moody's

Question 8

The State of Adaven issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5%. Determine the value of these bonds today to an investor who requires a 10% return on his investment.

Accepted Answer

A)  $25 
B)  $5 
C)  $10 
D)  $50 
A)  $25 
B)  $5 
C)  $10 
D)  $50

Question 9

How does a firm value an asset?

Accepted Answer

The value of any asset is based on the e

Question 10

National Medical has a zero coupon bond outstanding that sells for $242.60 and has 15 years to maturity. What is the yield to maturity on the bond to the nearest tenth of one percent?

Accepted Answer

A)  10.5% 
B)  9.1% 
C)  9.9% 
D)  11.0% 
A)  10.5% 
B)  9.1% 
C)  9.9% 
D)  11.0%

Question 11

The quality of a debenture depends on the

Accepted Answer

A)  general credit-worthiness of the issuing company 
B)  value of the assets used as collateral 
C)  the coupon rate of the debenture 
D)  length of time to maturity 
A)  general credit-worthiness of the issuing company 
B)  value of the assets used as collateral 
C)  the coupon rate of the debenture 
D)  length of time to maturity

Question 12

All of the following types of bonds are secured except

Accepted Answer

A)  collateral trust 
B)  mortgage 
C)  debentures 
D)  equipment trust certificates 
A)  collateral trust 
B)  mortgage 
C)  debentures 
D)  equipment trust certificates

Question 13

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?

Accepted Answer

A)  $607.72 
B)  $692.00 
C)  $1,000 
D)  $1,080 
A)  $607.72 
B)  $692.00 
C)  $1,000 
D)  $1,080

Question 14

Marko needs to raise capital through a zero-coupon bond debt offering. If the bonds will have 12 years to maturity and the rate of return on a bond in Marko's risk class is 11 percent, what will be the selling price of the bond?

Accepted Answer

A)  $302.50 
B)  $335.50 
C)  $269.50 
D)  $286.00 
A)  $302.50 
B)  $335.50 
C)  $269.50 
D)  $286.00

Question 15

Zero coupon bonds are an example of

Accepted Answer

A)  original issue deep discount bonds 
B)  extendible notes 
C)  convertible bonds 
D)  floating rate notes 
A)  original issue deep discount bonds 
B)  extendible notes 
C)  convertible bonds 
D)  floating rate notes

Question 16

What would a GMA 6% coupon bond maturing in 14 years sell (approximately) for if the current yield is 6.8633% and the yield-to-maturity is 7.48%?

Accepted Answer

A)  $950.20 
B)  $920.02 
C)  $1051.54 
D)  $874.21 
A)  $950.20 
B)  $920.02 
C)  $1051.54 
D)  $874.21

Question 17

What is the yield-to-maturity of an Acme bond selling for $1107.50 with 5 years to maturity, a 12 1/2% coupon, and semi-annual compounding?

Accepted Answer

A)  10.36% 
B)  11.29% 
C)  9.74% 
D)  10.20% 
A)  10.36% 
B)  11.29% 
C)  9.74% 
D)  10.20%

Question 18

What is the yield to maturity for a Poughkeepsie Gypsy Fortune Tellers' zero coupon bond that matures in 14 years if the bond is selling for $530.00?

Accepted Answer

A)  5.84% 
B)  4.64% 
C)  4.28% 
D)  5.49% 
A)  5.84% 
B)  4.64% 
C)  4.28% 
D)  5.49%

Question 19

Unsecured income bonds are considered ________________securities.

Accepted Answer

A)  strong 
B)  government 
C)  weak 
D)  non-corruptible 
A)  strong 
B)  government 
C)  weak 
D)  non-corruptible

Question 20

Users of preferred stock include:

Accepted Answer

A)  Utility companies 
B)  Acquiring firm in mergers and acquisitions 
C)  Large commercial banks 
D)  All of the above are users 
A)  Utility companies 
B)  Acquiring firm in mergers and acquisitions 
C)  Large commercial banks 
D)  All of the above are users

Exam 6: Fixed Income Securities: Characteristics and Valuation

In the Treasury bill quote that follows, the price of the bill can be calculated from the ____ price.

The call feature is an advantage to the issuing firm

In reading price quotes on U.S. Treasury bills, you would ____ expect to find the "asked" price higher than the "bid".

What is the collateral used in collateral trust bonds and who is its primary user?

The value of a 15-year bond will change ____ for a given change in the required rate of return than the value of a 5 year bond.

Potential sellers of an asset can be represented as a ____ schedule showing the ____ prices at which they are willing to sell given quantities of the asset.

"Junk bond" is a term used to describe a bond that

The State of Adaven issued $50 million of perpetual bonds in 1990. The bonds were issued in $100 denominations with an annual coupon interest rate of 5%. Determine the value of these bonds today to an investor who requires a 10% return on his investment.

How does a firm value an asset?

National Medical has a zero coupon bond outstanding that sells for $242.60 and has 15 years to maturity. What is the yield to maturity on the bond to the nearest tenth of one percent?

The quality of a debenture depends on the

All of the following types of bonds are secured except

Five years ago, the City of Baltimore sold at par a $1,000 bond with a coupon rate of 8 percent and 20 years to maturity. If this bond pays interest semiannually, what is the value of this bond to an investor who requires an 8 percent rate of return?

Marko needs to raise capital through a zero-coupon bond debt offering. If the bonds will have 12 years to maturity and the rate of return on a bond in Marko's risk class is 11 percent, what will be the selling price of the bond?

Zero coupon bonds are an example of

What would a GMA 6% coupon bond maturing in 14 years sell (approximately) for if the current yield is 6.8633% and the yield-to-maturity is 7.48%?

What is the yield-to-maturity of an Acme bond selling for $1107.50 with 5 years to maturity, a 12 1/2% coupon, and semi-annual compounding?

What is the yield to maturity for a Poughkeepsie Gypsy Fortune Tellers' zero coupon bond that matures in 14 years if the bond is selling for $530.00?

Unsecured income bonds are considered ________________securities.

Users of preferred stock include:

The Role and Objective of Financial Management

The Domestic and International Financial Marketplace

Evaluation of Financial Performance

Financial Planning and Forecasting

The Time Value of Money

Common Stock: Characteristics, Valuation, and Issuance

Analysis of Risk and Return

Capital Budgeting and Cash Flow Analysis

Capital Budgeting: Decision Criteria and Real Option Considerations

Capital Budgeting and Risk

The Cost of Capital

Capital Structure Concepts

Capital Structure Management in Practice

Dividend Policy

Working Capital Policy and Short-term Financing

The Management of Cash and Marketable Securities

Management of Accounts Receivable and Inventories

Lease and Intermediate-term Financing

Financing With Derivatives

Risk Management

International Financial Management

Corporate Restructuring

Continuous Compounding and Discounting

Mutually Exclusive Investments Having Unequal Lives

Breakeven Analysis

Bond Refunding Analysis

Taxes

Filters

Potential sellers of an asset can be represented as a schedule showing the prices at which they are willing to sell given quantities of the asset.