Question 1

Which type of bond is currently prohibited from being issued in the United States?

Accepted Answer

A) bearer bonds 
B) unregulated debentures 
C) tax avoidance bonds 
D) income bonds

Question 2

In actual practice, most corporate bonds pay interest:

Accepted Answer

A) annually 
B) semi-annually 
C) quarterly 
D) monthly

Question 3

The bond issuer does not necessarily know who is receiving interest payments on bearer bonds.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following risks would not be faced by investors in domestic bonds?

Accepted Answer

A) credit (or default) risk 
B) interest rate risk 
C) reinvestment rate (or rollover) risk 
D) exchange rate risk

Question 5

A bond that can be changed into a specified number of shares of the issuer's common stock is called a:

Accepted Answer

A) retractable bond 
B) convertible bond 
C) callable bond 
D) collateralized bond

Question 6

A debt holder may force the firm to abide by the terms of the debt contract even if the result is reorganization or dissolution of the firm.

Accepted Answer

A) True 
 B)False

Question 7

The par value of a common stock is meaningful in that it is often used to determine the fixed annual dividend.

Accepted Answer

A) True 
 B)False

Question 8

Global bonds usually are denominated in U.S.dollars and have offering sizes that typically exceed $1 billion.

Accepted Answer

A) True 
 B)False

Question 9

Private placements must be approved by the Securities and Exchange Commission (SEC).

Accepted Answer

A) True 
 B)False

Question 10

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

Accepted Answer

A) the ability of the firm to generate cash to sustain the level of dividends. 
B) legal and contractual considerations 
C) growth opportunities 
D) cost of other financing sources 
E) all of the above

Question 11

Most firms that issue dividends try to maintain a consistent _________________.

Accepted Answer

A) dividend per share 
B) dividend payout ratio 
C) both policies are frequently employed 
D) neither policy is frequently employed

Question 12

Consolidated Edison has just paid an annual dividend of $3 per share.If the expected growth rate for Con Ed is 10%, and your required rate of return is 16%, how much are you willing to pay for this stock?

Accepted Answer

A) $55 
B) $50 
C) $46.50 
D) none of the above

Question 13

Yankee bonds are U.S.dollar-denominated bonds that are issued in the United States by a foreign issuer.

Accepted Answer

A) True 
 B)False

Question 14

When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced:

Accepted Answer

A) below its par value 
B) at its par value 
C) above its par value 
D) The bond price cannot be determined

Question 15

When the market interest rate rises above the coupon rate for a particular quality of bond, the "current yield:"

Accepted Answer

A) will be below the coupon rate 
B) will be the same as the coupon rate 
C) will be above the coupon rate 
D) cannot be determined

Question 16

Chrysler has a bond outstanding with eight years remaining to maturity, a coupon rate of 5%, and semiannual payments.If the market price of the Chrysler bond is $729.05, what is the yield to maturity?

Accepted Answer

A) 7% 
B) 9% 
C) 10% 
D) 11%

Question 17

Global bonds are generally denominated in euros and are marketed globally.

Accepted Answer

A) True 
 B)False

Question 18

All other things being equal, aA bond's value will be below its maturity value of $1,000 if it pays interest of $100 per year and investors require a rate of return that is of, all other things being equal:

Accepted Answer

A) less than 10% 
B) exactly 10% 
C) higher than 10% 
D) either less than or greater than 10%

Exam 10: Bonds and Stocks: Characteristics and Valuation

Which type of bond is currently prohibited from being issued in the United States?

In actual practice, most corporate bonds pay interest:

The bond issuer does not necessarily know who is receiving interest payments on bearer bonds.

Which of the following risks would not be faced by investors in domestic bonds?

A bond that can be changed into a specified number of shares of the issuer's common stock is called a:

A debt holder may force the firm to abide by the terms of the debt contract even if the result is reorganization or dissolution of the firm.

The par value of a common stock is meaningful in that it is often used to determine the fixed annual dividend.

Global bonds usually are denominated in U.S.dollars and have offering sizes that typically exceed $1 billion.

Private placements must be approved by the Securities and Exchange Commission (SEC).

Several factors will be considered by the board of directors and management as they consider the level of dividend payout.Some of these factors include:

Most firms that issue dividends try to maintain a consistent _________________.

Consolidated Edison has just paid an annual dividend of $3 per share.If the expected growth rate for Con Ed is 10%, and your required rate of return is 16%, how much are you willing to pay for this stock?

Yankee bonds are U.S.dollar-denominated bonds that are issued in the United States by a foreign issuer.

When the market interest rate is above the coupon rate for a particular quality of bond, the bond will be priced:

When the market interest rate rises above the coupon rate for a particular quality of bond, the "current yield:"

Chrysler has a bond outstanding with eight years remaining to maturity, a coupon rate of 5%, and semiannual payments.If the market price of the Chrysler bond is $729.05, what is the yield to maturity?

Global bonds are generally denominated in euros and are marketed globally.

All other things being equal, aA bond's value will be below its maturity value of $1,000 if it pays interest of $100 per year and investors require a rate of return that is of, all other things being equal: