Question 1

A callable bond is one where the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principal is paid by final maturity.

Accepted Answer

A) True 
 B)False

Question 2

Standard revenue bonds are

Accepted Answer

A) backed by the full taxing authority of the municipality. 
B) collateralized by the earnings from a specific project. 
C) bonds backed by mortgages. 
D) backed by the U.S. Treasury. 
E) always offered with a best efforts offering. 
A) backed by the full taxing authority of the municipality. 
B) collateralized by the earnings from a specific project. 
C) bonds backed by mortgages. 
D) backed by the U.S. Treasury. 
E) always offered with a best efforts offering.

Question 3

Convertible bonds are
I. options attached to bonds that give the bondholder the right to purchase stock at a preset price without giving up the bond.
II. bonds in which the issue matures (converts)a little each year.
III. bonds collateralized with certain types of automobiles.
IV. bonds that may be converted to a certain number of shares of stock determined by the conversion ratio.

Accepted Answer

A) I only 
B) I and II only 
C) I,II,and III 
D) IV only 
E) I and III only 
A) I only 
B) I and II only 
C) I,II,and III 
D) IV only 
E) I and III only

Question 4

A T-bond with a $1,000 par is quoted at 97: 14 bid,97:
15 ask. The clean price for you to buy this bond is

Accepted Answer

A) $974.38. 
B) $975.42. 
C) $974.69. 
D) $975.77. 
E) none of the options. 
A) $974.38. 
B) $975.42. 
C) $974.69. 
D) $975.77. 
E) none of the options.

Question 5

You are considering purchasing five-year corporate bonds as an investment. You have a choice of terms available. Which of the following terms would you find desirable,ceteris paribus?
 How does each feature affect the bond's required rate of return?
 Explain.
a. call feature
b. convertible feature
c. warrants
d. sinking fund
e. debenture

Accepted Answer

a. The call feature favors the bond issu

Question 6

A T-bond with a $10,000 par is quoted at a bid of 92: 11 and an ask of 92:
17) If you bought the bond and then immediately sold it at the same quotes,how much money would you gain or lose (ignore commissions)?

Accepted Answer

A) $12.50 
B) -$12.50 
C) -$18.75 
D) $18.75 
E) $0.00 
A) $12.50 
B) -$12.50 
C) -$18.75 
D) $18.75 
E) $0.00

Question 7

Callable bonds have lower required yields than similar convertible bonds,ceteris paribus.

Accepted Answer

A) True 
 B)False

Question 8

SEC Rule 144 A does which of the following?

Accepted Answer

A) allows privately placed investments to be traded on a limited basis 
B) allows bond issuers to call their bonds when desired 
C) determines the limits of responsibility of bond covenants 
D) requires that bonds traded on the NYSE bond market utilize the ABS system 
E) none of the options 
A) allows privately placed investments to be traded on a limited basis 
B) allows bond issuers to call their bonds when desired 
C) determines the limits of responsibility of bond covenants 
D) requires that bonds traded on the NYSE bond market utilize the ABS system 
E) none of the options

Question 9

Eurobonds are bonds denominated in the issuer's home currency,but are issued outside their home country.

Accepted Answer

A) True 
 B)False

Question 10

A bondholder purchased a 9 percent coupon,$1,000 par three-year bond at a 9 percent yield. Interest rates then immediately fell to 7 percent and his bond was called at a price of $1,040. He reinvested his money and earned 7 percent on the $1,040 for three years. Did the call help or hurt the bondholder?
 What was his three-year rate of return on his original investment?

Accepted Answer

$1,040 (1.07)³ = $1,274.04 $1,0

Question 11

"On the run" Treasury notes and bonds are newly issued securities and "off the run" Treasuries are securities that have been previously issued.

Accepted Answer

A) True 
 B)False

Question 12

Revenue bonds are backed by the full revenue of the municipality.

Accepted Answer

A) True 
 B)False

Question 13

With respect to private placements of bonds,which of the following is correct?
I. Issuers of privately placed bonds tend to be less well known than public bond issues.
II. Interest rates on privately placed debt tend to be higher than for similar public issues.
III. Purchasers of privately placed debt have assets of at least $100 million.
IV. Once bonds have been privately placed,the original buyers must hold the bonds until maturity.

Accepted Answer

A) I only 
B) I and III only 
C) I,II,and III only 
D) I,III,and IV only 
E) I,II,III,and IV 
A) I only 
B) I and III only 
C) I,II,and III only 
D) I,III,and IV only 
E) I,II,III,and IV

Question 14

What ratings comprise investment-grade bonds and what ratings are used for junk bonds?
 What are the primary differences between the two?
 In particular,why are investment-grade bonds more marketable and why are junk bonds issued at all?

Accepted Answer

Investment-grade bonds are bonds rated A

A callable bond is one where the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principal is paid by final maturity.

Standard revenue bonds are

A T-bond with a $1,000 par is quoted at 97: 14 bid,97: 15 ask. The clean price for you to buy this bond is

A T-bond with a $10,000 par is quoted at a bid of 92: 11 and an ask of 92: 17) If you bought the bond and then immediately sold it at the same quotes,how much money would you gain or lose (ignore commissions)?

Callable bonds have lower required yields than similar convertible bonds,ceteris paribus.

SEC Rule 144 A does which of the following?

Eurobonds are bonds denominated in the issuer's home currency,but are issued outside their home country.

"On the run" Treasury notes and bonds are newly issued securities and "off the run" Treasuries are securities that have been previously issued.

Revenue bonds are backed by the full revenue of the municipality.

What ratings comprise investment-grade bonds and what ratings are used for junk bonds? What are the primary differences between the two? In particular,why are investment-grade bonds more marketable and why are junk bonds issued at all?

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters

Exam 6: Bond Markets

A callable bond is one where the issuer is required to retire a certain amount of the outstanding bonds each year to ensure that all the bond principal is paid by final maturity.

Standard revenue bonds are

A T-bond with a $1,000 par is quoted at 97: 14 bid,97: 15 ask. The clean price for you to buy this bond is

A T-bond with a $10,000 par is quoted at a bid of 92: 11 and an ask of 92: 17) If you bought the bond and then immediately sold it at the same quotes,how much money would you gain or lose (ignore commissions)?

Callable bonds have lower required yields than similar convertible bonds,ceteris paribus.

SEC Rule 144 A does which of the following?

Eurobonds are bonds denominated in the issuer's home currency,but are issued outside their home country.

"On the run" Treasury notes and bonds are newly issued securities and "off the run" Treasuries are securities that have been previously issued.

Revenue bonds are backed by the full revenue of the municipality.

What ratings comprise investment-grade bonds and what ratings are used for junk bonds? What are the primary differences between the two? In particular,why are investment-grade bonds more marketable and why are junk bonds issued at all?

Introduction

Determinants of Interest Rates

Interest Rates and Security Valuation

The Federal Reserve System, Monetary Policy, and Interest Rates

Money Markets

Mortgage Markets

Stock Markets

Foreign Exchange Markets

Derivative Securities Markets

Commercial Banks: Industry Overview

Commercial Banks Financial Statements and Analysis

Regulation of Commercial Banks

Other Lending Institutions: Savings Institutions, Credit Unions, and Finance Companies

Insurance Companies

Securities Firms and Investment Banks

Investment Companies

Pension Funds

Types of Risks Incurred by Financial Institutions

Managing Credit Risk on the Balance Sheet

Managing Liquidity Risk on the Balance Sheet

Managing Interest Rate Risk and Insolvency Risk on the Balance Sheet

Managing Risk Off the Balance Sheet With Derivative Securities

Managing Risk Off the Balance Sheet With Loan Sales and Securitization

Filters