Question 1

What are Treasury STRIPS?

Accepted Answer

The answer of What are Treasury STRIPS?...

Question 2

Distinguish between general obligation and revenue municipal bonds.

Accepted Answer

The answer of Distinguish between general obligation and revenue municipal...

Question 3

Most municipal bonds are revenue bonds rather than general obligation bonds.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following are true for the current yield?

Accepted Answer

A) The current yield is defined as the yearly coupon payment divided by the price of the security. 
B) The current yield and the yield to maturity always move together. 
C) The formula for the current yield is identical to the formula describing the yield to maturity for a discount bond. 
D) All of the above are true. 
E) Only A and B of the above are true. 
A) The current yield is defined as the yearly coupon payment divided by the price of the security. 
B) The current yield and the yield to maturity always move together. 
C) The formula for the current yield is identical to the formula describing the yield to maturity for a discount bond. 
D) All of the above are true. 
E) Only A and B of the above are true.

Question 5

Most corporate bonds have a face value of $1,000, are sold at a discount, and can only be redeemed at the maturity date.

Accepted Answer

A) True 
 B)False

Question 6

What is the difference between a general obligation bond and a revenue bond?

Accepted Answer

The answer of What is the difference between a general...

Question 7

The ________ rate is the rate of interest that the issuer must pay.

Accepted Answer

A) market 
B) coupon 
C) discount 
D) funds 
A) market 
B) coupon 
C) discount 
D) funds

Question 8

Most of the time, the interest rate on Treasury notes and bonds is ________ that on money market securities because of ________ risk.

Accepted Answer

A) above; interest-rate 
B) above; default 
C) below; interest-rate 
D) below; default 
A) above; interest-rate 
B) above; default 
C) below; interest-rate 
D) below; default

Question 9

The ________ value of a bond is the amount that the issuer must pay at maturity.

Accepted Answer

A) market 
B) present 
C) discounted 
D) face 
A) market 
B) present 
C) discounted 
D) face

Question 10

A secured bond is backed by

Accepted Answer

A) the general creditworthiness of the borrower. 
B) an insurance company's financial guarantee. 
C) the expected future earnings of the borrower. 
D) specific collateral. 
A) the general creditworthiness of the borrower. 
B) an insurance company's financial guarantee. 
C) the expected future earnings of the borrower. 
D) specific collateral.

Question 11

Governments never issue stock because

Accepted Answer

A) they cannot sell ownership claims. 
B) the Constitution expressly forbids it. 
C) both A and B of the above. 
D) neither A nor B of the above. 
A) they cannot sell ownership claims. 
B) the Constitution expressly forbids it. 
C) both A and B of the above. 
D) neither A nor B of the above.

Question 12

What types of risks should bondholders be aware of and how do these affect bond prices and yields?

Accepted Answer

The answer of What types of risks should bondholders be...

Question 13

What is a bond indenture?

Accepted Answer

The answer of What is a bond indenture?...

Question 14

In its simplest form, a credit default swap provides

Accepted Answer

A) insurance against default in the principle and interest payments of a credit instrument. 
B) an alternative method for bond issuers to pay principle and interest payments via a swap. 
C) bond investors with a method to swap interest payments for principle payments during a "credit event." 
D) the government with a guarantee that certain bond issues will not run into credit problems. 
A) insurance against default in the principle and interest payments of a credit instrument. 
B) an alternative method for bond issuers to pay principle and interest payments via a swap. 
C) bond investors with a method to swap interest payments for principle payments during a "credit event." 
D) the government with a guarantee that certain bond issues will not run into credit problems.

Question 15

A change in the current yield ________ signals a change in the same direction of the yield to maturity.

Accepted Answer

A) never 
B) rarely 
C) always 
D) often 
A) never 
B) rarely 
C) always 
D) often

Question 16

The Commodity Futures Modernization Act (2000)removed derivative securities, such as CDSs, from regulatory oversight. This change opened the door for speculators to bet on the health of a company or pool of assets, and was certainly a culprit in the 2007-2009 financial crisis. Why did Congress pass such legislation?

Accepted Answer

The answer of The Commodity Futures Modernization Act (2000)removed derivative...

Question 17

The nearer a bond's price is to its par value and the longer the maturity of the bond, the more closely the ________ approximates the ________.

Accepted Answer

A) current yield; yield to maturity 
B) current yield; coupon rate 
C) yield to maturity; current yield 
D) yield to maturity; coupon rate 
A) current yield; yield to maturity 
B) current yield; coupon rate 
C) yield to maturity; current yield 
D) yield to maturity; coupon rate

Question 18

The bond contract that states the lender's rights and privileges and the borrower's obligations is called the

Accepted Answer

A) bond syndicate. 
B) restrictive covenant. 
C) bond covenant. 
D) bond indenture. 
A) bond syndicate. 
B) restrictive covenant. 
C) bond covenant. 
D) bond indenture.

Question 19

The primary issuers of capital market securities include

Accepted Answer

A) the federal and local governments. 
B) the federal and local governments, and corporations. 
C) the federal and local governments, corporations, and financial institutions. 
D) local governments and corporations. 
A) the federal and local governments. 
B) the federal and local governments, and corporations. 
C) the federal and local governments, corporations, and financial institutions. 
D) local governments and corporations.

Question 20

What is the purpose of the capital market? How do capital market securities differ from money market securities in their general characteristics?

Accepted Answer

The answer of What is the purpose of the capital...

Exam 12: The Bond Market

What are Treasury STRIPS?

Distinguish between general obligation and revenue municipal bonds.

Most municipal bonds are revenue bonds rather than general obligation bonds.

Which of the following are true for the current yield?

Most corporate bonds have a face value of $1,000, are sold at a discount, and can only be redeemed at the maturity date.

What is the difference between a general obligation bond and a revenue bond?

The ________ rate is the rate of interest that the issuer must pay.

Most of the time, the interest rate on Treasury notes and bonds is ________ that on money market securities because of ________ risk.

The ________ value of a bond is the amount that the issuer must pay at maturity.

A secured bond is backed by

Governments never issue stock because

What types of risks should bondholders be aware of and how do these affect bond prices and yields?

What is a bond indenture?

In its simplest form, a credit default swap provides

A change in the current yield ________ signals a change in the same direction of the yield to maturity.

The nearer a bond's price is to its par value and the longer the maturity of the bond, the more closely the ________ approximates the ________.

The bond contract that states the lender's rights and privileges and the borrower's obligations is called the

The primary issuers of capital market securities include

What is the purpose of the capital market? How do capital market securities differ from money market securities in their general characteristics?

Why Study Financial Markets and Institutions

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation

Why Do Interest Rates Change

How Do Risk and Term Structure Affect Interest Rates

Are Financial Markets Efficient

Why Do Financial Institutions Exist

Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging With Financial Derivatives

Savings Associations and Credit Unions

Finance Companies

Filters

Most of the time, the interest rate on Treasury notes and bonds is that on money market securities because of risk.

The nearer a bond's price is to its par value and the longer the maturity of the bond, the more closely the approximates the .