Question 1

If a bond's price is lower than the principal amount,its yield to maturity will be ________ the coupon rate.

Accepted Answer

A)  less than 
B)  more than 
C)  equal to 
D)  no relation to 
A)  less than 
B)  more than 
C)  equal to 
D)  no relation to

Question 2

Which of the following bond ratings represents a high-quality risk class?

Accepted Answer

A)  Baa 
B)  Aa 
C)  Ba 
D)  C 
A)  Baa 
B)  Aa 
C)  Ba 
D)  C

Question 3

If you expect interest rates to rise over time,you should consider investing in bonds with longer maturities.

Accepted Answer

A) True 
 B)False

Question 4

What is the semiannual interest payment on a $1,000 bond with a 7% coupon rate?

Accepted Answer

A)  $70 
B)  $35 
C)  $350 
D)  $700 
A)  $70 
B)  $35 
C)  $350 
D)  $700

Question 5

List and describe three strategies for investing in bonds.

Accepted Answer

Interest rate strategy is selecting bond

Question 6

A ________ feature on a bond allows the issuer to buy back the bond from the investor before maturity.

Accepted Answer

A)  convertible 
B)  dividend 
C)  call 
D)  recall 
A)  convertible 
B)  dividend 
C)  call 
D)  recall

Question 7

One important aspect of bond research includes finding the bond rating.Bond ratings are related to what type of risk?

Accepted Answer

The answer of One important aspect of bond research includes...

Question 8

If a bond's value rises above its face value during its life,interest rates have

Accepted Answer

A)  increased. 
B)  decreased. 
C)  stayed the same. 
D)  there is no relationship between bond prices and interest rates. 
A)  increased. 
B)  decreased. 
C)  stayed the same. 
D)  there is no relationship between bond prices and interest rates.

Question 9

An advantage to owning bonds is that investors can sell them to other investors in the primary market before the bonds reach maturity.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following tax implications will result from selling your bonds at a lower price than what you paid for them eight months ago?

Accepted Answer

A)  You have a short-term capital gain taxed at your ordinary income tax rate. 
B)  You have a long-term capital gain subject to capital gains tax. 
C)  You have a long-term capital loss. 
D)  You have a short-term capital loss. 
A)  You have a short-term capital gain taxed at your ordinary income tax rate. 
B)  You have a long-term capital gain subject to capital gains tax. 
C)  You have a long-term capital loss. 
D)  You have a short-term capital loss.

Question 11

________ bonds are issued by state and local government agencies.

Accepted Answer

A)  Treasury 
B)  Municipal 
C)  Federal agency 
D)  Corporate 
A)  Treasury 
B)  Municipal 
C)  Federal agency 
D)  Corporate

Question 12

You should consider investing in bonds rather than stock if you

Accepted Answer

A)  are willing to take more risk. 
B)  wish to receive income from your investment. 
C)  are willing to tie up your investment for a long period. 
D)  think interest rates will increase significantly in the near future. 
A)  are willing to take more risk. 
B)  wish to receive income from your investment. 
C)  are willing to tie up your investment for a long period. 
D)  think interest rates will increase significantly in the near future.

Question 13

A call feature on bonds allows the issuer to buy back the bonds from investors before the maturity date.

Accepted Answer

A) True 
 B)False

Question 14

When a bond has a call feature,the investor should consider the ________ when deciding whether to invest in the bond if it is not selling at par value?

Accepted Answer

A)  convertibility provision 
B)  interest rate 
C)  yield to call 
D)  yield to maturity 
A)  convertibility provision 
B)  interest rate 
C)  yield to call 
D)  yield to maturity

Question 15

Some ________ bonds are called junk bonds,which have a high level of risk.

Accepted Answer

A)  Treasury 
B)  Municipal 
C)  Federal Agency 
D)  Corporate 
A)  Treasury 
B)  Municipal 
C)  Federal Agency 
D)  Corporate

Question 16

A bond's yield to maturity is above its coupon rate when

Accepted Answer

A)  the bond's market price is above par value. 
B)  the bond's market price is below par value. 
C)  the bond is convertible and the stock has appreciated. 
D)  interest rates are lower than the prime rate. 
A)  the bond's market price is above par value. 
B)  the bond's market price is below par value. 
C)  the bond is convertible and the stock has appreciated. 
D)  interest rates are lower than the prime rate.

Question 17

The two future cash flows used to determine a bond value are the periodic coupon payments and the ________ at maturity.

Accepted Answer

The answer of The two future cash flows used to...

Question 18

The secondary market price of a bond is based on

Accepted Answer

A)  the bond's coupon payments. 
B)  the number of years the bond has until maturity. 
C)  the market interest rate required for bonds of a similar risk and term. 
D)  All of the above are factors in determining the bond's market price. 
A)  the bond's coupon payments. 
B)  the number of years the bond has until maturity. 
C)  the market interest rate required for bonds of a similar risk and term. 
D)  All of the above are factors in determining the bond's market price.

Question 19

The present value of a bond can be computed by discounting the ________ to be received from the bond.

Accepted Answer

A)  capital gains 
B)  required rate of return 
C)  tax benefits 
D)  future cash flows (coupon and principal payments) 
A)  capital gains 
B)  required rate of return 
C)  tax benefits 
D)  future cash flows (coupon and principal payments)

Question 20

A convertible bond allows the investor to exchange that bond for another issue of bonds within the convertible period.

Accepted Answer

A) True 
 B)False

Exam 16: Investing in Bonds

If a bond's price is lower than the principal amount,its yield to maturity will be ________ the coupon rate.

Which of the following bond ratings represents a high-quality risk class?

If you expect interest rates to rise over time,you should consider investing in bonds with longer maturities.

What is the semiannual interest payment on a $1,000 bond with a 7% coupon rate?

List and describe three strategies for investing in bonds.

A ________ feature on a bond allows the issuer to buy back the bond from the investor before maturity.

One important aspect of bond research includes finding the bond rating.Bond ratings are related to what type of risk?

If a bond's value rises above its face value during its life,interest rates have

An advantage to owning bonds is that investors can sell them to other investors in the primary market before the bonds reach maturity.

Which of the following tax implications will result from selling your bonds at a lower price than what you paid for them eight months ago?

________ bonds are issued by state and local government agencies.

You should consider investing in bonds rather than stock if you

A call feature on bonds allows the issuer to buy back the bonds from investors before the maturity date.

When a bond has a call feature,the investor should consider the ________ when deciding whether to invest in the bond if it is not selling at par value?

Some ________ bonds are called junk bonds,which have a high level of risk.

A bond's yield to maturity is above its coupon rate when

The two future cash flows used to determine a bond value are the periodic coupon payments and the ________ at maturity.

The secondary market price of a bond is based on

The present value of a bond can be computed by discounting the ________ to be received from the bond.

A convertible bond allows the investor to exchange that bond for another issue of bonds within the convertible period.

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing Fundamentals

Investing in Stocks

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

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