Question 1

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. How much interest would the investor receive?

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $30 
E) $60 
A) $10 
B) $15 
C) $20 
D) $30 
E) $60 B

Question 2

Private placements refer exclusively to stock issues sold to insurance companies or individuals.

Accepted Answer

A) True 
 B)False  False

Question 3

The demand side of the bond market is dominated by

Accepted Answer

A) the federal government. 
B) wealthy individual investors. 
C) institutional investors. 
D) None of the above 
A) the federal government. 
B) wealthy individual investors. 
C) institutional investors. 
D) None of the above C

Question 4

The major provisions in the bond agreement are spelled out in the bond debenture.

Accepted Answer

A) True 
 B)False

Question 5

Income bonds are highly favored by corporations, because they provide the benefits of tax-deductible interest payments, without the contractual obligations of most debt instruments.

Accepted Answer

A) True 
 B)False

Question 6

A corporate bond quoted at 108.25 is selling for:

Accepted Answer

A) $108.25. 
B) $1,082.50. 
C) $10,825. 
D) None of the above 
A) $108.25. 
B) $1,082.50. 
C) $10,825. 
D) None of the above

Question 7

Major investors in municipal bonds include:

Accepted Answer

A) banks. 
B) pension funds. 
C) wealthy individuals. 
D) A and C 
A) banks. 
B) pension funds. 
C) wealthy individuals. 
D) A and C

Question 8

A legal document which is administered by an independent trustee and spells out the major provisions of a bond agreement is called the

Accepted Answer

A) bond contract. 
B) bond indenture. 
C) debenture. 
D) bond subordination. 
A) bond contract. 
B) bond indenture. 
C) debenture. 
D) bond subordination.

Question 9

Changes in the market rate of interest are reflected in the semiannual interest payments of a variable rate note, while the price remains stable.

Accepted Answer

A) True 
 B)False

Question 10

Corporate bonds carry a higher yield than government issues, and are fully taxable for federal, state, and local purposes.

Accepted Answer

A) True 
 B)False

Question 11

Securities issued by the Federal Farm Credit Bank

Accepted Answer

A) are essentially risk-free. 
B) carry a higher yield than U.S. Treasury securities. 
C) are fully taxable by federal, state, and local governments. 
D) All of the above 
A) are essentially risk-free. 
B) carry a higher yield than U.S. Treasury securities. 
C) are fully taxable by federal, state, and local governments. 
D) All of the above

Question 12

Like the stock market, there is a strong secondary market for bond issues, particularly corporate and municipal bonds.

Accepted Answer

A) True 
 B)False

Question 13

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. What will be the price of the Treasury bill?

Accepted Answer

A) $940 
B) $970 
C) $980 
D) $985 
E) $990 
A) $940 
B) $970 
C) $980 
D) $985 
E) $990

Question 14

Large or jumbo CDs are $100,000 or greater in size.

Accepted Answer

A) True 
 B)False

Question 15

A Treasury note normally has a maturity of:

Accepted Answer

A) less than one year. 
B) 1 to 5 years. 
C) 1 to 10 years. 
D) 10 to 30 years. 
E) 30 to 100 years. 
A) less than one year. 
B) 1 to 5 years. 
C) 1 to 10 years. 
D) 10 to 30 years. 
E) 30 to 100 years.

Question 16

Assume a $1,000 Treasury bill is quoted to pay 9.5% interest over a six-month period.
a) How much interest would an investor receive?
b) What will be the price of the Treasury bill?
c) What will be the true rate of return?

Accepted Answer

a) $47.50
b) $952.50
c) 9.97%

Question 17

The difference between a general obligation and a revenue bond is:

Accepted Answer

A) the general obligation bond is backed by the full faith, credit, and "taxing power" of the governmental unit. 
B) that for a revenue bond, the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture. 
C) that general obligation bonds are usually of high quality because of the taxing power behind most of them. 
D) All of the above 
A) the general obligation bond is backed by the full faith, credit, and "taxing power" of the governmental unit. 
B) that for a revenue bond, the repayment of the issue is fully dependent on the revenue-generating capability of a specific project or venture. 
C) that general obligation bonds are usually of high quality because of the taxing power behind most of them. 
D) All of the above

Question 18

All of the following are available to individual investors except:

Accepted Answer

A) commercial paper. 
B) bankers' acceptances. 
C) money market funds. 
D) All of the above are available to individual investors 
A) commercial paper. 
B) bankers' acceptances. 
C) money market funds. 
D) All of the above are available to individual investors

Question 19

A split rating means that bond-rating agencies assigned different ratings.

Accepted Answer

A) True 
 B)False

Question 20

An investor in a municipal bond will receive 8% interest. He is in a 33% tax bracket. The comparable before-tax yield on a taxable investment is 14%.

Accepted Answer

A) True 
 B)False

Exam 11: Bond and Fixed-Income Fundamentals

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. How much interest would the investor receive?

Private placements refer exclusively to stock issues sold to insurance companies or individuals.

The demand side of the bond market is dominated by

The major provisions in the bond agreement are spelled out in the bond debenture.

Income bonds are highly favored by corporations, because they provide the benefits of tax-deductible interest payments, without the contractual obligations of most debt instruments.

A corporate bond quoted at 108.25 is selling for:

Major investors in municipal bonds include:

A legal document which is administered by an independent trustee and spells out the major provisions of a bond agreement is called the

Changes in the market rate of interest are reflected in the semiannual interest payments of a variable rate note, while the price remains stable.

Corporate bonds carry a higher yield than government issues, and are fully taxable for federal, state, and local purposes.

Securities issued by the Federal Farm Credit Bank

Like the stock market, there is a strong secondary market for bond issues, particularly corporate and municipal bonds.

Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. What will be the price of the Treasury bill?

Large or jumbo CDs are $100,000 or greater in size.

A Treasury note normally has a maturity of:

Assume a $1,000 Treasury bill is quoted to pay 9.5% interest over a six-month period. a) How much interest would an investor receive? b) What will be the price of the Treasury bill? c) What will be the true rate of return?

The difference between a general obligation and a revenue bond is:

All of the following are available to individual investors except:

A split rating means that bond-rating agencies assigned different ratings.

An investor in a municipal bond will receive 8% interest. He is in a 33% tax bracket. The comparable before-tax yield on a taxable investment is 14%.

The Investment Setting

Security Markets

Participating in the Market

Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts

Economic Activity

Industry Analysis

Valuation of the Individual Firm

Financial Statement Analysis

Efficient Markets and Anomalies

Behavioral Finance and Technical Analysis

Principles of Bond Valuation and Investment

Convertible Securities and Warrants

Put and Call Options

Commodities and Financial Futures

Stock Index Futures and Options

A Basic Look at Portfolio Management and Capital Market Theory

Duration and Bond Portfolio Management

International Securities Markets

Investments in Real Assets

Alternative Investments: Private Equity and Hedge Funds

Measuring Risks and Returns of Portfolio Managers

A Comprehensive Analysis for Real Estate Investment Decisions

The Makeup of Institutional Investors

Filters