Exam 4: Personal Investing - Investing in Bonds

Given the following ATT Ltd.bond information:$1000 par value,maturity Dec 22,2023,semi-annual coupon 7.75 percent,price 105.50 and yield 7.4 percent.How much interest does it pay annually?

Name and explain five risks involved with investing in bonds and indicate the magnitude of these risks and ways to mitigate them.

The risk that you will be forced to sell your bond back to the issuer prior to maturity is the

Bonds usually pay interest

A government of Canada strip bond maturing in 22 years has lower interest rate risk than a real return bond maturing in 10 years.

The maturity matching strategy of investing in bonds is the surest way to have money available to meet a specific goal.

The inclusion of real return bonds in the federal government's financing requirements has made them very attractive.Discuss all of the features of a real return bond.What risk is attached to a 25 year real return bond yielding 4 percent?

One difference between a regular bond and a convertible bond is that a regular bond has

When there is an element of default risk on a bond,the interest rate will include

A Government of Canada bond has a 6 percent coupon which pays semi-annually and matures in 11 years.If interest rates have declined to 5.4 percent for similar bonds,what should be the price for this bond? (Assume $1000 par value)

A 25-year strip bond with face value of $25 000 and yielding 4.2 percent should cost $8938.

The bond par value or face value is the amount the investor will be paid when the bond matures.

If you purchased a bond on August 1,2014 on the secondary market with face value $10000 and received $200 interest on January 1,2015,you would owe tax on the interest earned on your 2014 tax return.

Bonds that may be exchanged for common stock at the option of the bondholders are called

Which of the following features of a bond could result in the company never paying out cash to redeem the bonds?

If an issuer wanted to protect against a drop in interest rates,the issuer of a bond would probably include which feature?

Canada Savings Bonds and T-Bills are both secure short-term debt securities which can be purchased on the secondary market.

Which of the following government of Canada bonds (with all other features the same)would have the most interest rate risk?

What is the yield to maturity on the following bond: $10000 par value,semi-annual coupon of 5 percent,maturing in six years and currently trading for $10777 ?

Allan purchased a five-year strip bond from the Government of Canada with a $100 000 face value.The equivalent yield is 5.91 percent.What interest will the bond earn over the five-year term?