Question 1

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.

Accepted Answer

A)  serial 
B)  sinking 
C)  debenture 
D)  indenture 
E)  money 
A)  serial 
B)  sinking 
C)  debenture 
D)  indenture 
E)  money

Question 2

Why do corporations sell bonds?

Accepted Answer

A)  To improve the firm's financial leverage 
B)  To pay for major purchases 
C)  Because they are finding it difficult or impossible to sell stock 
D)  Because the interest is tax-deductible 
E)  For all of the reasons listed in the other answers 
A)  To improve the firm's financial leverage 
B)  To pay for major purchases 
C)  Because they are finding it difficult or impossible to sell stock 
D)  Because the interest is tax-deductible 
E)  For all of the reasons listed in the other answers

Question 3

If a bond is purchased at a price above the face value, the yield to maturity is:

Accepted Answer

A)  greater than the stated interest rate. 
B)  the same as the stated interest rate. 
C)  less than the stated interest rate. 
D)  zero. 
E)  of no significance. 
A)  greater than the stated interest rate. 
B)  the same as the stated interest rate. 
C)  less than the stated interest rate. 
D)  zero. 
E)  of no significance.

Question 4

The current yield for a bond is determined by dividing the annual income amount by the current market value.

Accepted Answer

A) True 
 B)False

Question 5

Since 1990, bond yields for high-quality corporate bonds have increased significantly.

Accepted Answer

A) True 
 B)False

Question 6

A corporate bond rated B by Moody's would be suitable for:

Accepted Answer

A)  every investor. 
B)  very cautious investors. 
C)  speculators. 
D)  no one because the bond issue is in default. 
E)  investors who are highly dependent upon the interest income. 
A)  every investor. 
B)  very cautious investors. 
C)  speculators. 
D)  no one because the bond issue is in default. 
E)  investors who are highly dependent upon the interest income.

Question 7

Which type of bond would provide the most price stability?

Accepted Answer

A)  Discount 
B)  Short-term 
C)  Long-term 
D)  Speculative 
E)  Zero-coupon 
A)  Discount 
B)  Short-term 
C)  Long-term 
D)  Speculative 
E)  Zero-coupon

Question 8

What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Accepted Answer

A)  $80 
B)  $90 
C)  $889 
D)  $1,000 
E)  $1,125 
A)  $80 
B)  $90 
C)  $889 
D)  $1,000 
E)  $1,125

Question 9

Which one of the following bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.

Accepted Answer

A)  Bond that is rated CCC 
B)  Mortgage bond that is rated AAA 
C)  Debenture bond that is rated BBB 
D)  Convertible bond that is rated BBB 
E)  Bond that is rated A 
A)  Bond that is rated CCC 
B)  Mortgage bond that is rated AAA 
C)  Debenture bond that is rated BBB 
D)  Convertible bond that is rated BBB 
E)  Bond that is rated A

Question 10

Corporate bonds are a form of equity financing that does not have to be repaid.

Accepted Answer

A) True 
 B)False

Question 11

An issue of serial bonds:

Accepted Answer

A)  will pay no interest payments. 
B)  will have varying issue dates. 
C)  will have a series of maturity dates. 
D)  cannot be called. 
E)  will all mature ten years from the date of issue. 
A)  will pay no interest payments. 
B)  will have varying issue dates. 
C)  will have a series of maturity dates. 
D)  cannot be called. 
E)  will all mature ten years from the date of issue.

Question 12

With the use of technology and computers, the book entry form of bond ownership is no longer used.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following terms applies to a bond issue for which the issuer puts money aside at regular intervals for the purpose of redeeming the bonds?

Accepted Answer

A)  Serial 
B)  Default 
C)  Sinking fund 
D)  Low-coupon 
E)  Convertible 
A)  Serial 
B)  Default 
C)  Sinking fund 
D)  Low-coupon 
E)  Convertible

Question 14

Which one of the following statements is false?

Accepted Answer

A)  The federal government sells bonds and securities to obtain financing. 
B)  U.S. government Treasury securities carry a reduced risk of default when compared to corporate securities. 
C)  U.S. government Treasury securities offer lower interest rates than corporate bonds. 
D)  Most individual investors that purchase Treasury bills, notes, and bonds bid competitively. 
E)  Treasury securities may be purchased through banks or brokers. 
A)  The federal government sells bonds and securities to obtain financing. 
B)  U.S. government Treasury securities carry a reduced risk of default when compared to corporate securities. 
C)  U.S. government Treasury securities offer lower interest rates than corporate bonds. 
D)  Most individual investors that purchase Treasury bills, notes, and bonds bid competitively. 
E)  Treasury securities may be purchased through banks or brokers.

Question 15

A convertible bond:

Accepted Answer

A)  pays both interest and dividends simultaneously. 
B)  pays no interest payments. 
C)  can be repurchased by the issuer prior to maturity. 
D)  can be exchanged for a set number of shares of common stock. 
E)  is secured by the FDIC. 
A)  pays both interest and dividends simultaneously. 
B)  pays no interest payments. 
C)  can be repurchased by the issuer prior to maturity. 
D)  can be exchanged for a set number of shares of common stock. 
E)  is secured by the FDIC.

Question 16

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.
T-bills are issued in a minimum unit of $100 with additional increments of $100 above the minimum. Maturities are 4, 13, 26, and 52 weeks.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true with respect to U.S. Treasury issues?

Accepted Answer

A)  Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years. 
B)  Treasury notes are issued in $100 units with a maturity of more than 1 year, but not more than 10 years. 
C)  Treasury bonds are issued in $5,000 units with 10-year maturities. 
D)  The Treasury no longer issues Treasury bills. 
E)  Treasury bills generally pay a higher interest rate than Treasury bonds. 
A)  Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years. 
B)  Treasury notes are issued in $100 units with a maturity of more than 1 year, but not more than 10 years. 
C)  Treasury bonds are issued in $5,000 units with 10-year maturities. 
D)  The Treasury no longer issues Treasury bills. 
E)  Treasury bills generally pay a higher interest rate than Treasury bonds.

Question 18

If a bond is quoted in the newspaper at 92, the current price of a $1,000 face value bond is:

Accepted Answer

A)  $9.20. 
B)  $92.00. 
C)  $920.00. 
D)  $1,000.00. 
E)  $1,092.00. 
A)  $9.20. 
B)  $92.00. 
C)  $920.00. 
D)  $1,000.00. 
E)  $1,092.00.

Question 19

A government security issued in $100 units with maturities of more than one year but not more than ten years is called a:

Accepted Answer

A)  subordinated bond. 
B)  Treasury bill. 
C)  Treasury note. 
D)  Treasury bond. 
E)  savings bond. 
A)  subordinated bond. 
B)  Treasury bill. 
C)  Treasury note. 
D)  Treasury bond. 
E)  savings bond.

Question 20

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

A) True 
 B)False

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.

Why do corporations sell bonds?

If a bond is purchased at a price above the face value, the yield to maturity is:

The current yield for a bond is determined by dividing the annual income amount by the current market value.

Since 1990, bond yields for high-quality corporate bonds have increased significantly.

A corporate bond rated B by Moody's would be suitable for:

Which type of bond would provide the most price stability?

What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Which one of the following bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.

Corporate bonds are a form of equity financing that does not have to be repaid.

An issue of serial bonds:

With the use of technology and computers, the book entry form of bond ownership is no longer used.

Which of the following terms applies to a bond issue for which the issuer puts money aside at regular intervals for the purpose of redeeming the bonds?

Which one of the following statements is false?

A convertible bond:

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years. T-bills are issued in a minimum unit of $100 with additional increments of $100 above the minimum. Maturities are 4, 13, 26, and 52 weeks.

Which of the following statements is true with respect to U.S. Treasury issues?

If a bond is quoted in the newspaper at 92, the current price of a $1,000 face value bond is:

A government security issued in $100 units with maturities of more than one year but not more than ten years is called a:

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Personal Finance Basics and the Time Value of Money

Financial Aspects of Career Planning

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

Financial Services: Savings Plans and Payment Accounts

Introduction to Consumer Credit

Choosing a Source of Credit: The Costs of Credit Alternatives

Consumer Purchasing Strategies and Legal Protection

The Housing Decision: Factors and Finances

Property and Motor Vehicle Insurance

Health, Disability, and Long-Term Care Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Investing in Real Estate and Other Investment Alternatives

Starting Early: Retirement Planning

Estate Planning

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Exam 15: Investing in Bonds

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.

Why do corporations sell bonds?

If a bond is purchased at a price above the face value, the yield to maturity is:

The current yield for a bond is determined by dividing the annual income amount by the current market value.

Since 1990, bond yields for high-quality corporate bonds have increased significantly.

A corporate bond rated B by Moody's would be suitable for:

Which type of bond would provide the most price stability?

What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Which one of the following bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.

Corporate bonds are a form of equity financing that does not have to be repaid.

An issue of serial bonds:

With the use of technology and computers, the book entry form of bond ownership is no longer used.

Which of the following terms applies to a bond issue for which the issuer puts money aside at regular intervals for the purpose of redeeming the bonds?

Which one of the following statements is false?

A convertible bond:

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years. T-bills are issued in a minimum unit of $100 with additional increments of $100 above the minimum. Maturities are 4, 13, 26, and 52 weeks.

Which of the following statements is true with respect to U.S. Treasury issues?

If a bond is quoted in the newspaper at 92, the current price of a $1,000 face value bond is:

A government security issued in $100 units with maturities of more than one year but not more than ten years is called a:

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Personal Finance Basics and the Time Value of Money

Financial Aspects of Career Planning

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

Financial Services: Savings Plans and Payment Accounts

Introduction to Consumer Credit

Choosing a Source of Credit: The Costs of Credit Alternatives

Consumer Purchasing Strategies and Legal Protection

The Housing Decision: Factors and Finances

Property and Motor Vehicle Insurance

Health, Disability, and Long-Term Care Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Investing in Real Estate and Other Investment Alternatives

Starting Early: Retirement Planning

Estate Planning

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