Question 1

Investors who purchase subordinated debentures usually enjoy higher interest rates than other bondholders because of the increased risk associated with this type of bond.

Accepted Answer

A) True 
 B)False

Question 2

The yield on a 365 days T-Bill with a purchase price of $989.50 is 10.6%.

Accepted Answer

A) True 
 B)False

Question 3

The highest bond rating issued by the Dominion Bond Rating Service (DBRS) is

Accepted Answer

A)  AAA. 
B)  Aaa. 
C)  A+. 
D)  BB. 
E)  Excellent. 
A)  AAA. 
B)  Aaa. 
C)  A+. 
D)  BB. 
E)  Excellent.

Question 4

How do interest rates in the economy affect the price of a corporate bond? Give a numerical example.

Accepted Answer

All bonds are issued with a stated face

Question 5

The main reason why investors choose Canadian government securities is the above average interest rates that these securities pay.

Accepted Answer

A) True 
 B)False

Question 6

The sale of bonds can also improve a corporation's financial leverage.

Accepted Answer

A) True 
 B)False

Question 7

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Accepted Answer

A)  debenture 
B)  indenture 
C)  mortgage 
D)  preemptive 
E)  treasury 
A)  debenture 
B)  indenture 
C)  mortgage 
D)  preemptive 
E)  treasury

Question 8

David Leclair purchased a federal government bond. The bond had a face value of $500. He purchased a:

Accepted Answer

A)  treasury bill. 
B)  treasury note. 
C)  treasury bond. 
D)  Canada Savings Bond. 
E)  general obligation bond. 
A)  treasury bill. 
B)  treasury note. 
C)  treasury bond. 
D)  Canada Savings Bond. 
E)  general obligation bond.

Question 9

Which of the following statements is true?

Accepted Answer

A)  Convertible corporate bonds are more secure than government bonds. 
B)  Convertible bonds often pay 1 to 2 percent more interest than nonconvertible bonds. 
C)  Because of the conversion feature, it is not necessary to evaluate convertible, corporate bonds. 
D)  In reality, there is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value. 
E)  Even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments. 
A)  Convertible corporate bonds are more secure than government bonds. 
B)  Convertible bonds often pay 1 to 2 percent more interest than nonconvertible bonds. 
C)  Because of the conversion feature, it is not necessary to evaluate convertible, corporate bonds. 
D)  In reality, there is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value. 
E)  Even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments.

Question 10

A registered coupon bond is registered for interest, but not for the principal amount.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following differentiates a bond from a GIC? 
I. Only bonds are subject to price risk.
II. Only bonds can generate a capital gain.
III. Only bonds are marketable securities.

Accepted Answer

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

Question 12

A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.

Accepted Answer

A) True 
 B)False

Question 13

Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Accepted Answer

A) True 
 B)False

Question 14

Maturity dates for corporate bonds generally range from 5 to 7 years.

Accepted Answer

A) True 
 B)False

Question 15

Identify the incorrect statement.

Accepted Answer

A)  Canada Savings Bonds are marketable bonds. 
B)  Long-term bonds embody more inflation risk than short-term bonds. 
C)  A bond denominated in U.S. dollars subjects a Canadian bondholder to foreign currency risk. 
D)  Bonds sold before they mature can incur capital gains or losses. 
E)  Provincial bonds are relatively risk free 
A)  Canada Savings Bonds are marketable bonds. 
B)  Long-term bonds embody more inflation risk than short-term bonds. 
C)  A bond denominated in U.S. dollars subjects a Canadian bondholder to foreign currency risk. 
D)  Bonds sold before they mature can incur capital gains or losses. 
E)  Provincial bonds are relatively risk free

Question 16

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

Accepted Answer

A)  debenture 
B)  mortgage 
C)  indenture 
D)  convertible 
E)  subordinated 
A)  debenture 
B)  mortgage 
C)  indenture 
D)  convertible 
E)  subordinated

Question 17

Which of the following investment characteristics would be favorable to an investor? 
I. Callable
II. Convertible
III. Cumulative dividends
IV. Pledge of collateral

Accepted Answer

A)  I, II and III are correct 
B)  II, III and IV are correct 
C)  I and III are correct 
D)  I, II, III and IV are all correct 
E)  I and II are correct 
A)  I, II and III are correct 
B)  II, III and IV are correct 
C)  I and III are correct 
D)  I, II, III and IV are all correct 
E)  I and II are correct

Question 18

Maturity dates for corporate bonds generally range from 1 to 30 years.

Accepted Answer

A) True 
 B)False

Question 19

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

A) True 
 B)False

Question 20

Define yield to maturity.

Accepted Answer

A yield to maturity is a yield

Investors who purchase subordinated debentures usually enjoy higher interest rates than other bondholders because of the increased risk associated with this type of bond.

The yield on a 365 days T-Bill with a purchase price of $989.50 is 10.6%.

The highest bond rating issued by the Dominion Bond Rating Service (DBRS) is

How do interest rates in the economy affect the price of a corporate bond? Give a numerical example.

The main reason why investors choose Canadian government securities is the above average interest rates that these securities pay.

The sale of bonds can also improve a corporation's financial leverage.

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

David Leclair purchased a federal government bond. The bond had a face value of $500. He purchased a:

Which of the following statements is true?

A registered coupon bond is registered for interest, but not for the principal amount.

Which of the following differentiates a bond from a GIC? I. Only bonds are subject to price risk. II. Only bonds can generate a capital gain. III. Only bonds are marketable securities.

A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.

Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Maturity dates for corporate bonds generally range from 5 to 7 years.

Identify the incorrect statement.

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

Which of the following investment characteristics would be favorable to an investor? I. Callable II. Convertible III. Cumulative dividends IV. Pledge of collateral

Maturity dates for corporate bonds generally range from 1 to 30 years.

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Define yield to maturity.

Personal Financial Planning: An Introduction

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

The Banking Services of Financial Institutions

Introduction to Consumer Credit

Choosing a Source Credit: the Costs of Credit Alternatives

The Finances of Housing

Home and Automobile Insurance

Life, Health, and Disability Insurance

Fundamentals of Investing

Investing in Stocks

Investing in Mutual Funds

Retirement Planning

Estate Planning

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Exam 12: Investing in Bonds

Investors who purchase subordinated debentures usually enjoy higher interest rates than other bondholders because of the increased risk associated with this type of bond.

The yield on a 365 days T-Bill with a purchase price of $989.50 is 10.6%.

The highest bond rating issued by the Dominion Bond Rating Service (DBRS) is

How do interest rates in the economy affect the price of a corporate bond? Give a numerical example.

The main reason why investors choose Canadian government securities is the above average interest rates that these securities pay.

The sale of bonds can also improve a corporation's financial leverage.

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

David Leclair purchased a federal government bond. The bond had a face value of $500. He purchased a:

Which of the following statements is true?

A registered coupon bond is registered for interest, but not for the principal amount.

Which of the following differentiates a bond from a GIC? I. Only bonds are subject to price risk. II. Only bonds can generate a capital gain. III. Only bonds are marketable securities.

A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.

Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Maturity dates for corporate bonds generally range from 5 to 7 years.

Identify the incorrect statement.

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

Which of the following investment characteristics would be favorable to an investor? I. Callable II. Convertible III. Cumulative dividends IV. Pledge of collateral

Maturity dates for corporate bonds generally range from 1 to 30 years.

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Define yield to maturity.

Personal Financial Planning: An Introduction

Money Management Strategy: Financial Statements and Budgeting

Planning Your Tax Strategy

The Banking Services of Financial Institutions

Introduction to Consumer Credit

Choosing a Source Credit: the Costs of Credit Alternatives

The Finances of Housing

Home and Automobile Insurance

Life, Health, and Disability Insurance

Fundamentals of Investing

Investing in Stocks

Investing in Mutual Funds

Retirement Planning

Estate Planning

Filters