Question 1

Which one of the following applies to U.S.Treasury auctions?

Accepted Answer

A)  Every bidder has a choice of submitting either a competitive or a noncompetitive bid. 
B)  The purchase price paid by all bidders is the highest bid price. 
C)  Each bidder with an accepted bid will pay the individual price he or she bid. 
D)  All noncompetitive bids are accepted automatically. 
E)  Noncompetitive bids are ignored unless there are not enough competitive bids to buy the entire issue. 
A)  Every bidder has a choice of submitting either a competitive or a noncompetitive bid. 
B)  The purchase price paid by all bidders is the highest bid price. 
C)  Each bidder with an accepted bid will pay the individual price he or she bid. 
D)  All noncompetitive bids are accepted automatically. 
E)  Noncompetitive bids are ignored unless there are not enough competitive bids to buy the entire issue.

Question 2

Which one of the following descriptors is used to identify a bond that pays one single payment at maturity?

Accepted Answer

A)  zero coupon 
B)  imputed value 
C)  solo 
D)  STRIP 
E)  term 
A)  zero coupon 
B)  imputed value 
C)  solo 
D)  STRIP 
E)  term

Question 3

During a bankruptcy proceeding,Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid.What type of bond is Bond A?

Accepted Answer

A)  plain vanilla bond 
B)  senior trust bond 
C)  junior trust bond 
D)  subordinated debenture 
E)  senior debenture 
A)  plain vanilla bond 
B)  senior trust bond 
C)  junior trust bond 
D)  subordinated debenture 
E)  senior debenture

Question 4

A bond that is currently selling for $925.44 has a conversion price of $50.00.If the par value is $1,000,what is the conversion ratio?

Accepted Answer

A)  20 
B)  21 
C)  22 
D)  23 
E)  24 
A)  20 
B)  21 
C)  22 
D)  23 
E)  24

Question 5

Which one of the following is an assessment of the credit quality of a bond based on the financial condition of the bond issuer?

Accepted Answer

A)  protective covenant 
B)  risk analysis 
C)  credit rating 
D)  serial report 
E)  in-the-money status 
A)  protective covenant 
B)  risk analysis 
C)  credit rating 
D)  serial report 
E)  in-the-money status

Question 6

A bond has a conversion ratio of 22,a $1,000 par value,and a market price of $1,038.The stock is selling for $46.14.What is the conversion value?

Accepted Answer

A)  $1,009.16 
B)  $1,015.08 
C)  $1,038.60 
D)  $1,049.35 
E)  $1,053.50 
A)  $1,009.16 
B)  $1,015.08 
C)  $1,038.60 
D)  $1,049.35 
E)  $1,053.50

Question 7

Which one of the following is another name for a junk bond?

Accepted Answer

A)  high-yield 
B)  convertible 
C)  private placement 
D)  subordinated 
E)  called 
A)  high-yield 
B)  convertible 
C)  private placement 
D)  subordinated 
E)  called

Question 8

How much will you be paid if you own a bond that is called under a make-whole call provision?

Accepted Answer

A)  the face value 
B)  an amount equal to the par value plus the total amount of the remaining interest payments 
C)  the present value of all future bond payments that will not be paid because of the call 
D)  the current market value plus a prespecified call premium 
E)  an amount equal to the normal maturity value of the bond 
A)  the face value 
B)  an amount equal to the par value plus the total amount of the remaining interest payments 
C)  the present value of all future bond payments that will not be paid because of the call 
D)  the current market value plus a prespecified call premium 
E)  an amount equal to the normal maturity value of the bond

Question 9

Which one of the following is a municipal bond that is secured by the income collected from a specific project?

Accepted Answer

A)  agency bond 
B)  general obligation bond 
C)  development bond 
D)  contingency bond 
E)  revenue bond 
A)  agency bond 
B)  general obligation bond 
C)  development bond 
D)  contingency bond 
E)  revenue bond

Question 10

A bond has a conversion ratio of 24 and a market price of $1,080.If the par value is $1,000,what is the conversion price?

Accepted Answer

A)  $40.00 
B)  $41.67 
C)  $42.60 
D)  $43.20 
E)  $43.80 
A)  $40.00 
B)  $41.67 
C)  $42.60 
D)  $43.20 
E)  $43.80

Question 11

Which one of the following parties is the largest holder of U.S.corporate bonds?

Accepted Answer

A)  pension funds 
B)  life insurance companies 
C)  banks 
D)  foreign investors 
E)  individual investors 
A)  pension funds 
B)  life insurance companies 
C)  banks 
D)  foreign investors 
E)  individual investors

Question 12

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

Accepted Answer

A)  indenture summary 
B)  financial disclosure 
C)  covenant agreement 
D)  security agreement 
E)  trust agreement 
A)  indenture summary 
B)  financial disclosure 
C)  covenant agreement 
D)  security agreement 
E)  trust agreement

Question 13

A bond has 6 years until it can be called,a 7 percent coupon,and a $1,000 face value.The bond has a market value of $1,031.90 and a yield to call of 7.35 percent.What is the call premium?

Accepted Answer

A)  $45 
B)  $55 
C)  $65 
D)  $75 
E)  $85 
A)  $45 
B)  $55 
C)  $65 
D)  $75 
E)  $85

Question 14

A semi-annual coupon bond has a 5 percent coupon rate,a $1,000 face value,a current value of $1,020,and 3 years until the first call date.What is the call price if the yield to call is 5.5 percent?

Accepted Answer

A)  $1,000 
B)  $1,020 
C)  $1,040 
D)  $1,060 
E)  $1,080 
A)  $1,000 
B)  $1,020 
C)  $1,040 
D)  $1,060 
E)  $1,080

Question 15

A Treasury bond has a yield to maturity of 5.2 percent,a time to maturity of 8 years,and a coupon rate of 7 percent.What is the bond price?

Accepted Answer

A)  $940.65 
B)  $946.95 
C)  $1,054.55 
D)  $1,116.59 
E)  $1,169.56 
A)  $940.65 
B)  $946.95 
C)  $1,054.55 
D)  $1,116.59 
E)  $1,169.56

Question 16

Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

Accepted Answer

A)  redemption fund 
B)  sinking fund 
C)  liquidation account 
D)  serial account 
E)  callable account 
A)  redemption fund 
B)  sinking fund 
C)  liquidation account 
D)  serial account 
E)  callable account

Question 17

A corporate bond is yielding 7.31 percent and a municipal bond is yielding 4.75 percent.What is the critical marginal tax rate?

Accepted Answer

A)  28 percent 
B)  30 percent 
C)  33 percent 
D)  35 percent 
E)  38 percent 
A)  28 percent 
B)  30 percent 
C)  33 percent 
D)  35 percent 
E)  38 percent

Question 18

A bond has a face value of $1,000 and a call price of $1,030.The bond is callable in 3.5 years and pays a 5 percent,semi-annual coupon.What is the current price if the yield to call is 6 percent?

Accepted Answer

A)  $912.36 
B)  $927.19 
C)  $966.25 
D)  $993.24 
E)  $1,009.01 
A)  $912.36 
B)  $927.19 
C)  $966.25 
D)  $993.24 
E)  $1,009.01

Question 19

Kathy lives in State A and owns a municipal bond issued by State B.The interest earned on this bond is most apt to be exempt from taxation at which of the following levels?

Accepted Answer

A)  local only 
B)  state only 
C)  federal only 
D)  local and state only 
E)  federal, state, and local 
A)  local only 
B)  state only 
C)  federal only 
D)  local and state only 
E)  federal, state, and local

Question 20

A STRIPS has a $9,000 par value and a market value of $7,050.The time to maturity is 5 years.What is the yield to maturity?

Accepted Answer

A)  2.07 percent 
B)  3.00 percent 
C)  4.94 percent 
D)  5.00 percent 
E)  5.07 percent 
A)  2.07 percent 
B)  3.00 percent 
C)  4.94 percent 
D)  5.00 percent 
E)  5.07 percent

Which one of the following applies to U.S.Treasury auctions?

Which one of the following descriptors is used to identify a bond that pays one single payment at maturity?

During a bankruptcy proceeding,Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid.What type of bond is Bond A?

A bond that is currently selling for $925.44 has a conversion price of $50.00.If the par value is $1,000,what is the conversion ratio?

Which one of the following is an assessment of the credit quality of a bond based on the financial condition of the bond issuer?

A bond has a conversion ratio of 22,a $1,000 par value,and a market price of $1,038.The stock is selling for $46.14.What is the conversion value?

Which one of the following is another name for a junk bond?

How much will you be paid if you own a bond that is called under a make-whole call provision?

Which one of the following is a municipal bond that is secured by the income collected from a specific project?

A bond has a conversion ratio of 24 and a market price of $1,080.If the par value is $1,000,what is the conversion price?

Which one of the following parties is the largest holder of U.S.corporate bonds?

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

A bond has 6 years until it can be called,a 7 percent coupon,and a $1,000 face value.The bond has a market value of $1,031.90 and a yield to call of 7.35 percent.What is the call premium?

A semi-annual coupon bond has a 5 percent coupon rate,a $1,000 face value,a current value of $1,020,and 3 years until the first call date.What is the call price if the yield to call is 5.5 percent?

A Treasury bond has a yield to maturity of 5.2 percent,a time to maturity of 8 years,and a coupon rate of 7 percent.What is the bond price?

Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

A corporate bond is yielding 7.31 percent and a municipal bond is yielding 4.75 percent.What is the critical marginal tax rate?

A bond has a face value of $1,000 and a call price of $1,030.The bond is callable in 3.5 years and pays a 5 percent,semi-annual coupon.What is the current price if the yield to call is 6 percent?

Kathy lives in State A and owns a municipal bond issued by State B.The interest earned on this bond is most apt to be exempt from taxation at which of the following levels?

A STRIPS has a $9,000 par value and a market value of $7,050.The time to maturity is 5 years.What is the yield to maturity?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

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Exam 18: Corporate and Government Bonds

Which one of the following applies to U.S.Treasury auctions?

Which one of the following descriptors is used to identify a bond that pays one single payment at maturity?

During a bankruptcy proceeding,Bond A will be paid only if funds remain after the bonds that have a higher claim on the issuer's assets have been paid.What type of bond is Bond A?

A bond that is currently selling for $925.44 has a conversion price of $50.00.If the par value is $1,000,what is the conversion ratio?

Which one of the following is an assessment of the credit quality of a bond based on the financial condition of the bond issuer?

A bond has a conversion ratio of 22,a $1,000 par value,and a market price of $1,038.The stock is selling for $46.14.What is the conversion value?

Which one of the following is another name for a junk bond?

How much will you be paid if you own a bond that is called under a make-whole call provision?

Which one of the following is a municipal bond that is secured by the income collected from a specific project?

A bond has a conversion ratio of 24 and a market price of $1,080.If the par value is $1,000,what is the conversion price?

Which one of the following parties is the largest holder of U.S.corporate bonds?

Which one of the following is the portion of a prospectus that outlines the contractual terms of a new bond issue?

A bond has 6 years until it can be called,a 7 percent coupon,and a $1,000 face value.The bond has a market value of $1,031.90 and a yield to call of 7.35 percent.What is the call premium?

A semi-annual coupon bond has a 5 percent coupon rate,a $1,000 face value,a current value of $1,020,and 3 years until the first call date.What is the call price if the yield to call is 5.5 percent?

A Treasury bond has a yield to maturity of 5.2 percent,a time to maturity of 8 years,and a coupon rate of 7 percent.What is the bond price?

Which one of the following is an account used to provide for scheduled redemptions of outstanding bonds?

A corporate bond is yielding 7.31 percent and a municipal bond is yielding 4.75 percent.What is the critical marginal tax rate?

A bond has a face value of $1,000 and a call price of $1,030.The bond is callable in 3.5 years and pays a 5 percent,semi-annual coupon.What is the current price if the yield to call is 6 percent?

Kathy lives in State A and owns a municipal bond issued by State B.The interest earned on this bond is most apt to be exempt from taxation at which of the following levels?

A STRIPS has a $9,000 par value and a market value of $7,050.The time to maturity is 5 years.What is the yield to maturity?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Global Economic Activity and Industry Analysis

Mortgage-Backed Securities

Filters