Question 1

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 2

A bond has a par value of $1,000 and a market price of $1,087.20.The conversion price is $40 and the stock price is $41.75.What is the conversion value?

Accepted Answer

A) $1,043.75 
B) $1,250.00 
C) $1,481.10 
D) $1,500.00 
E) $1,652.00 
A) $1,043.75 
B) $1,250.00 
C) $1,481.10 
D) $1,500.00 
E) $1,652.00

Question 3

What are the restrictions on investment portfolios that require that all securities held within the portfolio meet a specified level of safety called?

Accepted Answer

A) protective covenants 
B) negative restrictions 
C) prudent investment guidelines 
D) safety monitors 
E) risk ranges 
A) protective covenants 
B) negative restrictions 
C) prudent investment guidelines 
D) safety monitors 
E) risk ranges

Question 4

Which one of the following provisions grants the bondholder the option of exchanging a bond for a prespecified number of shares of stock of the same issuer?

Accepted Answer

A) put 
B) call 
C) equity 
D) conversion 
E) sinking 
A) put 
B) call 
C) equity 
D) conversion 
E) sinking

Question 5

Bonds with relatively high coupons due to their speculative credit ratings are called which one of the following?

Accepted Answer

A) investment-grade bonds 
B) high-yield bonds 
C) prudent risk bonds 
D) floating-rate bonds 
E) covenant bonds 
A) investment-grade bonds 
B) high-yield bonds 
C) prudent risk bonds 
D) floating-rate bonds 
E) covenant bonds

Question 6

A bond that is currently selling for $933.38 has a conversion price of $40.00.If the par value is $1,000,what is the conversion ratio?

Accepted Answer

A) 23 
B) 24 
C) 25 
D) 26 
E) 27 
A) 23 
B) 24 
C) 25 
D) 26 
E) 27

Question 7

Which of the following statements correctly apply to TIPS?
I.They are quoted as a percentage of the current accrued principal.
II.They pay a variable interest rate that responds to movements in the inflation rate.
III.They are backed by the full faith and credit of the U.S.government.
IV.They adjust for inflation on an annual basis.

Accepted Answer

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

Question 8

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 9

Which one of the following statements related to a put bond is correct?

Accepted Answer

A) Put bonds are generally redeemed at a premium over par value. 
B) Put bonds can be redeemed at any time once the put protection period has elapsed. 
C) The put feature effectively sets the ceiling price for the bond. 
D) The put feature helps protect bondholders from the risk associated with rising interest rates. 
E) A putable bond is generally priced lower than a comparable nonputable bond. 
A) Put bonds are generally redeemed at a premium over par value. 
B) Put bonds can be redeemed at any time once the put protection period has elapsed. 
C) The put feature effectively sets the ceiling price for the bond. 
D) The put feature helps protect bondholders from the risk associated with rising interest rates. 
E) A putable bond is generally priced lower than a comparable nonputable bond.

Question 10

Which of the following are common characteristics associated with corporate bonds?
I.specified cash flows
II.equity ownership
III.call feature
IV.set maturity date

Accepted Answer

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

Question 11

A $5,000 face value municipal bond matures in 6 years and has a market value of $5,110.The coupon rate is 3.5 percent with interest paid semiannually.What is the yield to maturity?

Accepted Answer

A) 2.92 percent 
B) 3.10 percent 
C) 3.73 percent 
D) 5.13 percent 
E) 6.38 percent 
A) 2.92 percent 
B) 3.10 percent 
C) 3.73 percent 
D) 5.13 percent 
E) 6.38 percent

Question 12

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 13

A convertible bond has a par value of $1,000,a market value of $875,and a conversion ratio of 14.What is the conversion price?

Accepted Answer

A) $55.56 
B) $58.82 
C) $62.50 
D) $66.67 
E) $71.43 
A) $55.56 
B) $58.82 
C) $62.50 
D) $66.67 
E) $71.43

Question 14

A bond has a conversion price of $47.62,a par value of $1,000,and a market price of $833.40.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 15

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 16

Which one of the following terms is given to the value of a convertible bond that would equate to the value of a comparable nonconvertible bond?

Accepted Answer

A) out-of-the money value 
B) in-the-money value 
C) discounted value 
D) external value 
E) intrinsic value 
A) out-of-the money value 
B) in-the-money value 
C) discounted value 
D) external value 
E) intrinsic value

Question 17

Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured.Your marginal tax rate is 28 percent.Your equivalent taxable yield on the insured bonds is _____ percent and on the uninsured bonds is _____ percent.

Accepted Answer

A) 5.89; 6.27 
B) 6.11; 6.53 
C) 6.31; 6.81 
D) 6.67; 7.10 
E) 6.76; 7.10 
A) 5.89; 6.27 
B) 6.11; 6.53 
C) 6.31; 6.81 
D) 6.67; 7.10 
E) 6.76; 7.10

Question 18

The entire formal contract between a bond issuer and the bondholders is found in which one of the following documents?

Accepted Answer

A) prospectus 
B) prospectus summary 
C) indenture agreement 
D) indenture summary 
E) trust certificate 
A) prospectus 
B) prospectus summary 
C) indenture agreement 
D) indenture summary 
E) trust certificate

Question 19

How is the minimal value for a convertible bond determined?

Accepted Answer

The minimal value for a convertible bond

Question 20

A corporate bond is yielding 6.8 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

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

A bond has a par value of $1,000 and a market price of $1,087.20.The conversion price is $40 and the stock price is $41.75.What is the conversion value?

What are the restrictions on investment portfolios that require that all securities held within the portfolio meet a specified level of safety called?

Which one of the following provisions grants the bondholder the option of exchanging a bond for a prespecified number of shares of stock of the same issuer?

Bonds with relatively high coupons due to their speculative credit ratings are called which one of the following?

A bond that is currently selling for $933.38 has a conversion price of $40.00.If the par value is $1,000,what is the conversion ratio?

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?

Which one of the following statements related to a put bond is correct?

Which of the following are common characteristics associated with corporate bonds? I.specified cash flows II.equity ownership III.call feature IV.set maturity date

A $5,000 face value municipal bond matures in 6 years and has a market value of $5,110.The coupon rate is 3.5 percent with interest paid semiannually.What is the yield to maturity?

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

A convertible bond has a par value of $1,000,a market value of $875,and a conversion ratio of 14.What is the conversion price?

A bond has a conversion price of $47.62,a par value of $1,000,and a market price of $833.40.What is the conversion ratio?

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?

Which one of the following terms is given to the value of a convertible bond that would equate to the value of a comparable nonconvertible bond?

Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured.Your marginal tax rate is 28 percent.Your equivalent taxable yield on the insured bonds is _ percent and on the uninsured bonds is _ percent.

The entire formal contract between a bond issuer and the bondholders is found in which one of the following documents?

How is the minimal value for a convertible bond determined?

A corporate bond is yielding 6.8 percent and a municipal bond is yielding 4.75 percent.What is the critical marginal tax rate?

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

Exam 18: Corporate and Government Bonds

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

A bond has a par value of $1,000 and a market price of $1,087.20.The conversion price is $40 and the stock price is $41.75.What is the conversion value?

What are the restrictions on investment portfolios that require that all securities held within the portfolio meet a specified level of safety called?

Which one of the following provisions grants the bondholder the option of exchanging a bond for a prespecified number of shares of stock of the same issuer?

Bonds with relatively high coupons due to their speculative credit ratings are called which one of the following?

A bond that is currently selling for $933.38 has a conversion price of $40.00.If the par value is $1,000,what is the conversion ratio?

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?

Which one of the following statements related to a put bond is correct?

Which of the following are common characteristics associated with corporate bonds? I.specified cash flows II.equity ownership III.call feature IV.set maturity date

A $5,000 face value municipal bond matures in 6 years and has a market value of $5,110.The coupon rate is 3.5 percent with interest paid semiannually.What is the yield to maturity?

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

A convertible bond has a par value of $1,000,a market value of $875,and a conversion ratio of 14.What is the conversion price?

A bond has a conversion price of $47.62,a par value of $1,000,and a market price of $833.40.What is the conversion ratio?

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?

Which one of the following terms is given to the value of a convertible bond that would equate to the value of a comparable nonconvertible bond?

Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured.Your marginal tax rate is 28 percent.Your equivalent taxable yield on the insured bonds is _____ percent and on the uninsured bonds is _____ percent.

The entire formal contract between a bond issuer and the bondholders is found in which one of the following documents?

How is the minimal value for a convertible bond determined?

A corporate bond is yielding 6.8 percent and a municipal bond is yielding 4.75 percent.What is the critical marginal tax rate?

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

Municipal bonds are yielding 4.4 percent if they are insured and 4.7 percent if they are uninsured.Your marginal tax rate is 28 percent.Your equivalent taxable yield on the insured bonds is _ percent and on the uninsured bonds is _ percent.