Question 1

Distinguish between general obligation and revenue municipal bonds.

Accepted Answer

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

Question 2

Individuals and households frequently purchase capital market securities through financial institutions such as

Accepted Answer

A) mutual funds. 
B) pension funds. 
C) money market mutual funds. 
D) all of the above. 
E) only A and B of the above. 
A) mutual funds. 
B) pension funds. 
C) money market mutual funds. 
D) all of the above. 
E) only A and B of the above.

Question 3

The distribution of a firm's capital between debt and equity is its

Accepted Answer

A) current ratio. 
B) liability structure. 
C) acid ratio. 
D) capital structure. 
A) current ratio. 
B) liability structure. 
C) acid ratio. 
D) capital structure.

Question 4

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 5

A requirement in the bond indenture that the firm pay off a portion of the bond issue each year is called

Accepted Answer

A) a sinking fund. 
B) a call provision. 
C) a restrictive covenant. 
D) a shelf registration. 
A) a sinking fund. 
B) a call provision. 
C) a restrictive covenant. 
D) a shelf registration.

Question 6

(I)Securities that have an original maturity greater than one year are traded in money markets. (II)The best known money market securities are stocks and bonds.

Accepted Answer

A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false.

Question 7

(I)Firms and individuals use the capital markets for long-term investments. (II)Capital markets provide an alternative to investment in assets such as real estate and gold.

Accepted Answer

A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false. 
A) (I)is true, (II)false. 
B) (I)is false, (II)true. 
C) Both are true. 
D) Both are false.

Question 8

The largest purchasers of capital market securities are

Accepted Answer

A) households. 
B) corporations. 
C) governments. 
D) central banks. 
A) households. 
B) corporations. 
C) governments. 
D) central banks.

Question 9

Corporations may enter the capital markets because

Accepted Answer

A) they do not have sufficient capital to fund their investment opportunities. 
B) they want to preserve their capital to protect against expected needs. 
C) it is required by the Securities and Exchange Commission (SE
C) . 
D) none of the above. 
A) they do not have sufficient capital to fund their investment opportunities. 
B) they want to preserve their capital to protect against expected needs. 
C) it is required by the Securities and Exchange Commission (SE
C) . 
D) none of the above.

Question 10

Capital market trading occurs in

Accepted Answer

A) the primary market. 
B) the secondary market. 
C) both A and B of the above. 
D) none of the above. 
A) the primary market. 
B) the secondary market. 
C) both A and B of the above. 
D) none of the above.

Question 11

The current yield is a less accurate approximation of the yield to maturity the ________ the time to maturity of the bond and the ________ the price is from/to the par value.

Accepted Answer

A) shorter; closer 
B) shorter; farther 
C) longer; closer 
D) longer; farther 
A) shorter; closer 
B) shorter; farther 
C) longer; closer 
D) longer; farther

Question 12

The primary reason that individuals and firms choose to borrow long-term is to

Accepted Answer

A) reduce the risk that interest rates will fall before they pay off their debt. 
B) reduce the risk that interest rates will rise before they pay off their debt. 
C) reduce monthly interest payments, as interest rates tend to be higher on short-term than long-term debt instruments. 
D) reduce total interest payments over the life of the debt. 
A) reduce the risk that interest rates will fall before they pay off their debt. 
B) reduce the risk that interest rates will rise before they pay off their debt. 
C) reduce monthly interest payments, as interest rates tend to be higher on short-term than long-term debt instruments. 
D) reduce total interest payments over the life of the debt.

Question 13

The current yield on a bond is a good approximation of the bond's yield to maturity when the bond matures in five years or less and its price differs from its par value by a large amount.

Accepted Answer

A) True 
 B)False

Question 14

Debentures are long-term unsecured bonds that are backed only by the general creditworthiness of the issuer.

Accepted Answer

A) True 
 B)False

Question 15

Municipal bonds that are issued to pay for essential public projects are exempt from federal taxation.

Accepted Answer

A) True 
 B)False

Question 16

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 formula for the current yield is identical to the formula describing the yield to maturity for a discount bond. 
C) The current yield is always a poor approximation for the yield to maturity. 
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 formula for the current yield is identical to the formula describing the yield to maturity for a discount bond. 
C) The current yield is always a poor approximation for the yield to maturity. 
D) All of the above are true. 
E) Only A and B of the above are true.

Question 17

Registered bonds have now been largely replaced by bearer bonds, which do not have coupons.

Accepted Answer

A) True 
 B)False

Question 18

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 19

What is a callable bond? How does the callability feature affect the bond's price and interest rate?

Accepted Answer

The answer of What is a callable bond? How does...

Question 20

Explain the different types of corporate bonds.

Accepted Answer

There are several different types of cor

Exam 12: The Bond Market

Distinguish between general obligation and revenue municipal bonds.

Individuals and households frequently purchase capital market securities through financial institutions such as

The distribution of a firm's capital between debt and equity is its

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

A requirement in the bond indenture that the firm pay off a portion of the bond issue each year is called

(I)Securities that have an original maturity greater than one year are traded in money markets. (II)The best known money market securities are stocks and bonds.

(I)Firms and individuals use the capital markets for long-term investments. (II)Capital markets provide an alternative to investment in assets such as real estate and gold.

The largest purchasers of capital market securities are

Corporations may enter the capital markets because

Capital market trading occurs in

The current yield is a less accurate approximation of the yield to maturity the ________ the time to maturity of the bond and the ________ the price is from/to the par value.

The primary reason that individuals and firms choose to borrow long-term is to

The current yield on a bond is a good approximation of the bond's yield to maturity when the bond matures in five years or less and its price differs from its par value by a large amount.

Debentures are long-term unsecured bonds that are backed only by the general creditworthiness of the issuer.

Municipal bonds that are issued to pay for essential public projects are exempt from federal taxation.

Which of the following are true for the current yield?

Registered bonds have now been largely replaced by bearer bonds, which do not have coupons.

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

What is a callable bond? How does the callability feature affect the bond's price and interest rate?

Explain the different types of corporate bonds.

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

The current yield is a less accurate approximation of the yield to maturity the the time to maturity of the bond and the the price is from/to the par value.