Question 1

Which one of the following is the Treasury program allowing interest and principal payments from Treasury notes or bonds to be sold separately?

Accepted Answer

A) EDGAR 
B) TRSTRP 
C) TRIPS 
D) TZEROES 
E) STRIPS 
A) EDGAR 
B) TRSTRP 
C) TRIPS 
D) TZEROES 
E) STRIPS

Question 2

Which one of the following provisions grants the bondholder the option of selling the bond back to the issuer at a prespecified price on prespecified dates?

Accepted Answer

A) convertible 
B) call 
C) put 
D) exchange 
E) sinking fund 
A) convertible 
B) call 
C) put 
D) exchange 
E) sinking fund

Question 3

Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent.What is her after-tax yield on a corporate bond which has a 6.7 percent yield?

Accepted Answer

A) 4.82 percent 
B) 5.09 percent 
C) 5.47 percent 
D) 6.00 percent 
E) 11.34 percent 
A) 4.82 percent 
B) 5.09 percent 
C) 5.47 percent 
D) 6.00 percent 
E) 11.34 percent

Question 4

A moral obligation bond is which type of a bond?

Accepted Answer

A) municipal revenue 
B) municipal GO 
C) municipal hybrid 
D) U.S. Treasury 
E) U.S. agency 
A) municipal revenue 
B) municipal GO 
C) municipal hybrid 
D) U.S. Treasury 
E) U.S. agency

Question 5

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 6

The Federal Reserve is offering Treasury bills with a par value of $25 billion for sale.They have received $7 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions)   What price will Bidder A pay per bond,assuming that bid is accepted?

Accepted Answer

A)  $9,600 
B)  $9,650 
C)  $9,675 
D)  $9,700 
E)  $9,750 
A)  $9,600 
B)  $9,650 
C)  $9,675 
D)  $9,700 
E)  $9,750

Question 7

Which one of the following statements related to TIPS is correct assuming an inflationary environment?

Accepted Answer

A) TIPS have a maturity value of $1,000. 
B) TIPS pay an interest payment based on the latest T-bill rate. 
C) TIPS pay a fixed coupon rate. 
D) The principal amount of a TIPS is adjusted annually for inflation. 
E) The interest rate is adjusted semiannually for inflation. 
A) TIPS have a maturity value of $1,000. 
B) TIPS pay an interest payment based on the latest T-bill rate. 
C) TIPS pay a fixed coupon rate. 
D) The principal amount of a TIPS is adjusted annually for inflation. 
E) The interest rate is adjusted semiannually for inflation.

Question 8

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 9

What is the method of selling Treasury bills at less than face value called?

Accepted Answer

A) imputed basis 
B) par value method 
C) discount basis 
D) STRIP basis 
E) face value method 
A) imputed basis 
B) par value method 
C) discount basis 
D) STRIP basis 
E) face value method

Question 10

What is the conversion ratio of a $1,000 par value bond that is selling for $888.96 and has a conversion price of $58.82?

Accepted Answer

A) 15 
B) 16 
C) 17 
D) 18 
E) 19 
A) 15 
B) 16 
C) 17 
D) 18 
E) 19

Question 11

Which one of the following is an unsecured bond issued by a corporation?

Accepted Answer

A) indenture 
B) general obligation bond 
C) plain vanilla bond 
D) debenture 
E) trust bond 
A) indenture 
B) general obligation bond 
C) plain vanilla bond 
D) debenture 
E) trust bond

Question 12

U.S.government agency bonds pay interest which is subject to which of the following taxes?

Accepted Answer

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

Question 13

A STRIPS that matures in 8 years is selling for $11,490.The par value is $15,000.What is the yield to maturity?

Accepted Answer

A) 3.36 percent 
B) 4.67 percent 
C) 5.25 percent 
D) 6.54 percent 
E) 6.75 percent 
A) 3.36 percent 
B) 4.67 percent 
C) 5.25 percent 
D) 6.54 percent 
E) 6.75 percent

Question 14

Explain how the imputed interest is computed on a U.S.Treasury bill.

Accepted Answer

Imputed interest on a U.S. Treasury bill

Question 15

Which one of the following statements related to convertible bonds is correct?

Accepted Answer

A) Bondholders forego higher coupon rates in exchange for the conversion option. 
B) Convertible bonds are generally issued such that the conversion value is equal to the par value. 
C) The conversion price is equal to the bond's market value divided by the conversion ratio. 
D) The conversion value is equal to the bond's market price multiplied by the conversion ratio. 
E) Bonds should be converted as soon as the conversion value exceeds the face value. 
A) Bondholders forego higher coupon rates in exchange for the conversion option. 
B) Convertible bonds are generally issued such that the conversion value is equal to the par value. 
C) The conversion price is equal to the bond's market value divided by the conversion ratio. 
D) The conversion value is equal to the bond's market price multiplied by the conversion ratio. 
E) Bonds should be converted as soon as the conversion value exceeds the face value.

Question 16

Which one of the following statements related to callable bonds is correct?

Accepted Answer

A) Callable bonds are issued at the call price. 
B) Callable bonds can be called at any time. 
C) Callable bonds are generally called at the market price at the time of the call. 
D) Callable bonds are more apt to be called if market interest rates decline. 
E) Callable bonds are generally priced higher than comparable noncallable bonds. 
A) Callable bonds are issued at the call price. 
B) Callable bonds can be called at any time. 
C) Callable bonds are generally called at the market price at the time of the call. 
D) Callable bonds are more apt to be called if market interest rates decline. 
E) Callable bonds are generally priced higher than comparable noncallable bonds.

Question 17

A Treasury note has 3.5 years left to maturity,a yield to maturity of 4.25 percent,and a coupon rate of 4.40 percent.What is the price of the bond?

Accepted Answer

A) $1,004.83 
B) $1,005.53 
C) $1,006.56 
D) $1,007.58 
E) $1,008.96 
A) $1,004.83 
B) $1,005.53 
C) $1,006.56 
D) $1,007.58 
E) $1,008.96

Question 18

A convertible bond has a par value of $1,000 and a market price of $1,116.76.If the conversion ratio is 19,what is the conversion price?

Accepted Answer

A) $43.48 
B) $45.45 
C) $47.62 
D) $52.63 
E) $55.56 
A) $43.48 
B) $45.45 
C) $47.62 
D) $52.63 
E) $55.56

Question 19

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 20

Term bonds are defined as all bonds in a bond issue having which one of the following characteristics?

Accepted Answer

A) sequential maturity dates 
B) serial maturity dates 
C) multiple maturity dates 
D) an identical maturity date 
E) renewable maturity dates 
A) sequential maturity dates 
B) serial maturity dates 
C) multiple maturity dates 
D) an identical maturity date 
E) renewable maturity dates

Which one of the following is the Treasury program allowing interest and principal payments from Treasury notes or bonds to be sold separately?

Which one of the following provisions grants the bondholder the option of selling the bond back to the issuer at a prespecified price on prespecified dates?

Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent.What is her after-tax yield on a corporate bond which has a 6.7 percent yield?

A moral obligation bond is which type of a bond?

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

The Federal Reserve is offering Treasury bills with a par value of $25 billion for sale.They have received $7 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions) What price will Bidder A pay per bond,assuming that bid is accepted?

Which one of the following statements related to TIPS is correct assuming an inflationary environment?

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

What is the method of selling Treasury bills at less than face value called?

What is the conversion ratio of a $1,000 par value bond that is selling for $888.96 and has a conversion price of $58.82?

Which one of the following is an unsecured bond issued by a corporation?

U.S.government agency bonds pay interest which is subject to which of the following taxes?

A STRIPS that matures in 8 years is selling for $11,490.The par value is $15,000.What is the yield to maturity?

Explain how the imputed interest is computed on a U.S.Treasury bill.

Which one of the following statements related to convertible bonds is correct?

Which one of the following statements related to callable bonds is correct?

A Treasury note has 3.5 years left to maturity,a yield to maturity of 4.25 percent,and a coupon rate of 4.40 percent.What is the price of the bond?

A convertible bond has a par value of $1,000 and a market price of $1,116.76.If the conversion ratio is 19,what is the conversion price?

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?

Term bonds are defined as all bonds in a bond issue having which one of the following characteristics?

A Brief History of Risk and Return

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Overview of Security Types

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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

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Exam 18: Corporate and Government Bonds

Which one of the following is the Treasury program allowing interest and principal payments from Treasury notes or bonds to be sold separately?

Which one of the following provisions grants the bondholder the option of selling the bond back to the issuer at a prespecified price on prespecified dates?

Laura has an average tax rate of 22 percent and a marginal tax rate of 28 percent.What is her after-tax yield on a corporate bond which has a 6.7 percent yield?

A moral obligation bond is which type of a bond?

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

The Federal Reserve is offering Treasury bills with a par value of $25 billion for sale.They have received $7 billion of noncompetitive bids.The competitive bids for a $10,000 par value bond are: (Qty in billions) What price will Bidder A pay per bond,assuming that bid is accepted?

Which one of the following statements related to TIPS is correct assuming an inflationary environment?

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

What is the method of selling Treasury bills at less than face value called?

What is the conversion ratio of a $1,000 par value bond that is selling for $888.96 and has a conversion price of $58.82?

Which one of the following is an unsecured bond issued by a corporation?

U.S.government agency bonds pay interest which is subject to which of the following taxes?

A STRIPS that matures in 8 years is selling for $11,490.The par value is $15,000.What is the yield to maturity?

Explain how the imputed interest is computed on a U.S.Treasury bill.

Which one of the following statements related to convertible bonds is correct?

Which one of the following statements related to callable bonds is correct?

A Treasury note has 3.5 years left to maturity,a yield to maturity of 4.25 percent,and a coupon rate of 4.40 percent.What is the price of the bond?

A convertible bond has a par value of $1,000 and a market price of $1,116.76.If the conversion ratio is 19,what is the conversion price?

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?

Term bonds are defined as all bonds in a bond issue having which one of the following characteristics?

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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