Question 1

Investors purchase bonds because

Accepted Answer

A) they are a risk-free investment. 
B) they pay interest income. 
C) they pay dividends. 
D) the returns are higher than with stocks. 
A) they are a risk-free investment. 
B) they pay interest income. 
C) they pay dividends. 
D) the returns are higher than with stocks.

Question 2

Mortgage-backed securities are

Accepted Answer

A) issued by the Government of Canada for individual mortgages on residential homes. 
B) backed by a pool of mortgages guaranteed by CMHC. 
C) a pool of mortgages issued and guaranteed by banks. 
D) a pool of CMHC mortgages not available on the secondary market. 
A) issued by the Government of Canada for individual mortgages on residential homes. 
B) backed by a pool of mortgages guaranteed by CMHC. 
C) a pool of mortgages issued and guaranteed by banks. 
D) a pool of CMHC mortgages not available on the secondary market.

Question 3

When considering the risk from investing in a 25-year government of Canada bond yielding 4 percent,the most significant risk is interest rate risk.

Accepted Answer

A) True 
 B)False

Question 4

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 would a $1000 par value ATT Ltd.bond cost as of the day of this listing?

Accepted Answer

A) $105.50 
B) $740 
C) $1000 
D) $1055 
A) $105.50 
B) $740 
C) $1000 
D) $1055

Question 5

The total return on a 5 year bond with $10000 par value and an annual coupon rate of 6 percent will be most favourable if interest rates

Accepted Answer

A) increase to 8 percent. 
B) decrease to 4 percent. 
C) increase to 7 percent. 
D) decrease to 5 percent. 
A) increase to 8 percent. 
B) decrease to 4 percent. 
C) increase to 7 percent. 
D) decrease to 5 percent.

Question 6

You expect interest rates to rise in the short term.Your best strategy would be to

Accepted Answer

A) buy T-bills and keep rolling them over. 
B) buy long bonds and use interest income to purchase higher yields. 
C) buy short bonds only and keep rolling them over. 
D) buy T-bills in anticipation of locking in higher rates after the increase. 
A) buy T-bills and keep rolling them over. 
B) buy long bonds and use interest income to purchase higher yields. 
C) buy short bonds only and keep rolling them over. 
D) buy T-bills in anticipation of locking in higher rates after the increase.

Investors purchase bonds because

Mortgage-backed securities are

When considering the risk from investing in a 25-year government of Canada bond yielding 4 percent,the most significant risk is interest rate risk.

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 would a $1000 par value ATT Ltd.bond cost as of the day of this listing?

The total return on a 5 year bond with $10000 par value and an annual coupon rate of 6 percent will be most favourable if interest rates

You expect interest rates to rise in the short term.Your best strategy would be to

Tools for Financial Planning - Applying Time Value Concepts

Tools for Financial Planning - Planning with Personal Financial Statements

Tools for Financial Planning - Using Tax Concepts for Planning

Managing Your Financial Resources - Banking Services and Managing Your Money

Managing Your Financial Resources - Assessing,Managing and Securing Your Credit

Managing Your Financial Resources - Purchasing and Financing a Home

Protecting Your Wealth - Auto and Homeowner's Insurance

Protecting Your Wealth - Health and Life Insurance

Personal Investing - Investing Fundamentals

Personal Investing - Investing in Stocks

Personal Investing - Investing in Mutual Funds

Retirement and Estate Planning - Retirement Planning

Retirement and Estate Planning - Estate Planning

Synthesis of Financial Planning - Integrating the Components of a Financial Plan

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Exam 4: Personal Investing - Investing in Bonds

Investors purchase bonds because

Mortgage-backed securities are

When considering the risk from investing in a 25-year government of Canada bond yielding 4 percent,the most significant risk is interest rate risk.

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 would a $1000 par value ATT Ltd.bond cost as of the day of this listing?

The total return on a 5 year bond with $10000 par value and an annual coupon rate of 6 percent will be most favourable if interest rates

You expect interest rates to rise in the short term.Your best strategy would be to

Tools for Financial Planning - Applying Time Value Concepts

Tools for Financial Planning - Planning with Personal Financial Statements

Tools for Financial Planning - Using Tax Concepts for Planning

Managing Your Financial Resources - Banking Services and Managing Your Money

Managing Your Financial Resources - Assessing,Managing and Securing Your Credit

Managing Your Financial Resources - Purchasing and Financing a Home

Protecting Your Wealth - Auto and Homeowner's Insurance

Protecting Your Wealth - Health and Life Insurance

Personal Investing - Investing Fundamentals

Personal Investing - Investing in Stocks

Personal Investing - Investing in Mutual Funds

Retirement and Estate Planning - Retirement Planning

Retirement and Estate Planning - Estate Planning

Synthesis of Financial Planning - Integrating the Components of a Financial Plan

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