Exam 4: Personal Investing - Investing in Bonds

If the bond market expects a 10 percent yield,and ABC Ltd.pays coupon interest on its $1000 par value bond at eight percent semi-annually,the discount rate that investors should apply in the calculation of ABC Ltd.bond price should be

Other things being equal,in general,which of the following bonds is the lowest-risk bond?

A pool of money that is set aside by a corporation or government to repurchase a set amount of bonds in a set period of time is called a

A bond with a call feature would pay a slightly higher interest rate than the same bond without this feature.

Convertible bonds are suitable for investors who

A real return bond with a 7 percent coupon will increase its interest payment annually to $71.40 if inflation rises by 2 percent.

If a new issue corporate bond offers a coupon rate of 6.2 percent and Government of Canada bonds with the same term and features are paying a 3.8 percent coupon,then the risk premium for the corporate bond is 2.4 percent.

Bond interest is exempt from income tax (in the current year)if it is held in an RRSP,a TFSA or an RESP.

Which of the following bond quotes might indicate a bond has a high default risk?

A bond with a credit rating of AA is riskier than a bond with a credit rating of A.

On the secondary bond market

Which of the following bonds would be most attractive to an investor who is very concerned about risk?

A put feature on a bond is attractive to investors who believe interest rates will drop before the bond matures.

If you purchased a bond with face value $10 000 and coupon of 6 percent,then sold it for $10600 a half year later,you would have to pay tax on the capital gain as well as tax on the coupon payment of $300.

Rejean purchased a 20-year 6 percent real return bond for $15 000 and the CPI has increased by 1.5 percent in the first year.What interest payment will Rejean receive in the second year?

A passive strategy of bond investing consists of buying bonds for the long-term and not selling them until maturity.

What is a disadvantage of issuing bonds compared to shares?

If a company anticipates a substantive decline in interest rates during the term of the bond,which feature is likely to be included in its bond offering?

Generally,bonds have maturities between 1 and 30 years and pay interest annually.

Given the following bond information: Issuer coupon maturity price yield Ontario 3.150 2022-Jun-02 99.00 3.28 What would be the taxable income on this bond if it were purchased at this price on June 1st and sold December 1st for a price of 103.00 and has face value of $20 000 and a semi-annual coupon payment?