Question 1

A Treasury bond has a face value of $25,000 and a quoted price of 102: 20.What is the bond's dollar price?

Accepted Answer

A) $25,002.80 
B) $25,102.18 
C) $25,656.25 
D) $25,787.50 
E) $31,475.00 
A) $25,002.80 
B) $25,102.18 
C) $25,656.25 
D) $25,787.50 
E) $31,475.00

Question 2

Which one of the following best defines a plain vanilla bond?

Accepted Answer

A) bond secured by agricultural or food inventory 
B) bond with relatively standard features 
C) unsecured debt 
D) bond secured with financial collateral 
E) bond that has no coupon payments 
A) bond secured by agricultural or food inventory 
B) bond with relatively standard features 
C) unsecured debt 
D) bond secured with financial collateral 
E) bond that has no coupon payments

Question 3

Which one of the following is a municipal bond that is secured by both the revenues from a project and also by the taxing authority of the municipality?

Accepted Answer

A) mixed bond 
B) general obligation bond 
C) hybrid bond 
D) dual bond 
E) multiple bond 
A) mixed bond 
B) general obligation bond 
C) hybrid bond 
D) dual bond 
E) multiple bond

Question 4

Municipal bonds that are secured by the full faith and credit of the issuer are referred to as which one of the following?

Accepted Answer

A) general obligation bonds 
B) local taxation bonds 
C) fully funded bonds 
D) revenue bonds 
E) private activity bonds 
A) general obligation bonds 
B) local taxation bonds 
C) fully funded bonds 
D) revenue bonds 
E) private activity bonds

Question 5

Which one of the following defines an in-the-money bond?

Accepted Answer

A) secured bond with collateral value that exceeds the bond's price 
B) callable bond with a call price that exceeds the current market price 
C) put bond with a put price that exceeds the current market price 
D) convertible bond with a call price that exceeds its conversion value 
E) convertible bond with a conversion value that exceeds its call price 
A) secured bond with collateral value that exceeds the bond's price 
B) callable bond with a call price that exceeds the current market price 
C) put bond with a put price that exceeds the current market price 
D) convertible bond with a call price that exceeds its conversion value 
E) convertible bond with a conversion value that exceeds its call price

Question 6

A semi-annual coupon bond has a 6.5 percent coupon rate,a $1,000 face value,a current value of $1,054.54,and 4 years until the first call date.What is the call price if the yield to call is 6.7 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 7

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 8

Which one of the following terms is defined as debt issued without specific collateral pledged as security?

Accepted Answer

A) unsecured debt 
B) indenture 
C) vanilla bond 
D) naked bond 
E) risk-free bond 
A) unsecured debt 
B) indenture 
C) vanilla bond 
D) naked bond 
E) risk-free bond

Question 9

A municipal bond is yielding 4.8 percent.Jeremy has a marginal tax rate of 24 percent.What is his equivalent taxable yield?

Accepted Answer

A) 2.18 percent 
B) 4.58 percent 
C) 6.15 percent 
D) 6.32 percent 
E) 7.18 percent 
A) 2.18 percent 
B) 4.58 percent 
C) 6.15 percent 
D) 6.32 percent 
E) 7.18 percent

Question 10

Municipal bonds are yielding 4.8 percent currently.Alicia has a marginal tax rate of 35 percent and Yvonne has a marginal tax rate of 22 percent.Alicia's equivalent taxable yield is _____ percent and Yvonne's is _____ percent.

Accepted Answer

A) 7.50; 5.86 
B) 7.39; 6.15 
C) 6.53; 5.86 
D) 6.53; 6.15 
E) 8.29; 5.07 
A) 7.50; 5.86 
B) 7.39; 6.15 
C) 6.53; 5.86 
D) 6.53; 6.15 
E) 8.29; 5.07

Question 11

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 12

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 13

The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale.They have received $3 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions)   How much money will the Federal Reserve raise from this offering?

Accepted Answer

A)  $9.92 billion 
B)  $9.88 billion 
C)  $9.85 billion 
D)  $9.84 billion 
E)  $9.80 billion 
A)  $9.92 billion 
B)  $9.88 billion 
C)  $9.85 billion 
D)  $9.84 billion 
E)  $9.80 billion

Question 14

You own a corporate bond which is yielding 8.2 percent.What is your after-tax yield if your marginal tax rate is 28 percent?

Accepted Answer

A) 5.90 percent 
B) 7.52 percent 
C) 8.20 percent 
D) 10.58 percent 
E) 11.55 percent 
A) 5.90 percent 
B) 7.52 percent 
C) 8.20 percent 
D) 10.58 percent 
E) 11.55 percent

Question 15

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 16

The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale.They have received $11 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are:   How much money will the Federal Reserve raise from this offering?

Accepted Answer

A)  $29.55 billion 
B)  $29.40 billion 
C)  $29.10 billion 
D)  $29.33 billion 
E)  $29.25 billion 
A)  $29.55 billion 
B)  $29.40 billion 
C)  $29.10 billion 
D)  $29.33 billion 
E)  $29.25 billion

Question 17

What is the interest on a Treasury bill called when it is determined by the size of the bill's discount from face value?

Accepted Answer

A) assumed interest 
B) imputed interest 
C) imaginary interest 
D) convergent interest 
E) original-issue interest 
A) assumed interest 
B) imputed interest 
C) imaginary interest 
D) convergent interest 
E) original-issue interest

Question 18

A $1,000 par value bond has a market price of $986 and a conversion ratio of 15.The stock is selling for $60.74.What is the conversion value?

Accepted Answer

A) $903.17 
B) $911.10 
C) $925.60 
D) $930.57 
E) $946.49 
A) $903.17 
B) $911.10 
C) $925.60 
D) $930.57 
E) $946.49

Question 19

You have a marginal tax rate of 32 percent and an average tax rate of 28 percent.Municipal bonds in your area are yielding 4.25 percent.What is your equivalent taxable yield?

Accepted Answer

A) 5.16 percent 
B) 5.93 percent 
C) 5.13 percent 
D) 6.25 percent 
E) 6.47 percent 
A) 5.16 percent 
B) 5.93 percent 
C) 5.13 percent 
D) 6.25 percent 
E) 6.47 percent

Question 20

Lester is considering a municipal bond yielding 5.5 percent and a corporate bond yielding 8.2 percent.His marginal tax rate is 28 percent.He should invest in the _____ bond because the critical marginal tax rate is _____ percent.

Accepted Answer

A) corporate; 26 
B) corporate; 29 
C) corporate; 33 
D) municipal; 35 
E) municipal; 37 
A) corporate; 26 
B) corporate; 29 
C) corporate; 33 
D) municipal; 35 
E) municipal; 37

A Treasury bond has a face value of $25,000 and a quoted price of 102: 20.What is the bond's dollar price?

Which one of the following best defines a plain vanilla bond?

Which one of the following is a municipal bond that is secured by both the revenues from a project and also by the taxing authority of the municipality?

Municipal bonds that are secured by the full faith and credit of the issuer are referred to as which one of the following?

Which one of the following defines an in-the-money bond?

A semi-annual coupon bond has a 6.5 percent coupon rate,a $1,000 face value,a current value of $1,054.54,and 4 years until the first call date.What is the call price if the yield to call is 6.7 percent?

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 terms is defined as debt issued without specific collateral pledged as security?

A municipal bond is yielding 4.8 percent.Jeremy has a marginal tax rate of 24 percent.What is his equivalent taxable yield?

Municipal bonds are yielding 4.8 percent currently.Alicia has a marginal tax rate of 35 percent and Yvonne has a marginal tax rate of 22 percent.Alicia's equivalent taxable yield is _ percent and Yvonne's is _ percent.

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

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

The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale.They have received $3 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions) How much money will the Federal Reserve raise from this offering?

You own a corporate bond which is yielding 8.2 percent.What is your after-tax yield if your marginal tax rate is 28 percent?

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

The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale.They have received $11 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: How much money will the Federal Reserve raise from this offering?

What is the interest on a Treasury bill called when it is determined by the size of the bill's discount from face value?

A $1,000 par value bond has a market price of $986 and a conversion ratio of 15.The stock is selling for $60.74.What is the conversion value?

You have a marginal tax rate of 32 percent and an average tax rate of 28 percent.Municipal bonds in your area are yielding 4.25 percent.What is your equivalent taxable yield?

Lester is considering a municipal bond yielding 5.5 percent and a corporate bond yielding 8.2 percent.His marginal tax rate is 28 percent.He should invest in the _ bond because the critical marginal tax rate is _ percent.

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

A Treasury bond has a face value of $25,000 and a quoted price of 102: 20.What is the bond's dollar price?

Which one of the following best defines a plain vanilla bond?

Which one of the following is a municipal bond that is secured by both the revenues from a project and also by the taxing authority of the municipality?

Municipal bonds that are secured by the full faith and credit of the issuer are referred to as which one of the following?

Which one of the following defines an in-the-money bond?

A semi-annual coupon bond has a 6.5 percent coupon rate,a $1,000 face value,a current value of $1,054.54,and 4 years until the first call date.What is the call price if the yield to call is 6.7 percent?

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 terms is defined as debt issued without specific collateral pledged as security?

A municipal bond is yielding 4.8 percent.Jeremy has a marginal tax rate of 24 percent.What is his equivalent taxable yield?

Municipal bonds are yielding 4.8 percent currently.Alicia has a marginal tax rate of 35 percent and Yvonne has a marginal tax rate of 22 percent.Alicia's equivalent taxable yield is _____ percent and Yvonne's is _____ percent.

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

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

The Federal Reserve is offering Treasury bills with a par value of $10 billion for sale.They have received $3 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions) How much money will the Federal Reserve raise from this offering?

You own a corporate bond which is yielding 8.2 percent.What is your after-tax yield if your marginal tax rate is 28 percent?

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

The Federal Reserve is offering Treasury bills with a par value of $30 billion for sale.They have received $11 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: How much money will the Federal Reserve raise from this offering?

What is the interest on a Treasury bill called when it is determined by the size of the bill's discount from face value?

A $1,000 par value bond has a market price of $986 and a conversion ratio of 15.The stock is selling for $60.74.What is the conversion value?

You have a marginal tax rate of 32 percent and an average tax rate of 28 percent.Municipal bonds in your area are yielding 4.25 percent.What is your equivalent taxable yield?

Lester is considering a municipal bond yielding 5.5 percent and a corporate bond yielding 8.2 percent.His marginal tax rate is 28 percent.He should invest in the _____ bond because the critical marginal tax rate is _____ percent.

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 4.8 percent currently.Alicia has a marginal tax rate of 35 percent and Yvonne has a marginal tax rate of 22 percent.Alicia's equivalent taxable yield is _ percent and Yvonne's is _ percent.

Lester is considering a municipal bond yielding 5.5 percent and a corporate bond yielding 8.2 percent.His marginal tax rate is 28 percent.He should invest in the _ bond because the critical marginal tax rate is _ percent.