Question 1

Which one of the following statements is true?

Accepted Answer

A)  All local newspapers contain information on bond prices.
B)  In bond quotations, prices are given as a percentage of the bond's face value.
C)  The face value for most corporate bonds is $5,000.
D)  To find the market price of a corporate bond, you must contact the corporation that originally issued the bond.
E)  To find the market price of a corporate bond, you must call a stockbroker.F) A) and C)
G) None of the above

Question 2

In the U.S.,bond price quotations are based on the price of a bond with no accrued or earned interest,which is called the:

Accepted Answer

A)  dirty price.
B)  asked price.
C)  spread.
D)  clean price.
E)  coupon price.F) C) and E)
G) A) and B)

Question 3

What are the three ways to make money with a bond investment?

Accepted Answer

1.Interest income
2....

Question 4

You are trying to evaluate two bond issues.One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback,would you purchase the "A" bond or the "B" bond?

Accepted Answer

To determine the quality and risk associ...

Question 5

Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest.What is the amount of interest that you receive each year?

Accepted Answer

A)  $1,000.00
B)  $92.50
C)  $92.00
D)  $90.00
E)  $9.25F) A) and E)
G) A) and C)

Question 6

Which one of the following statements is correct?

Accepted Answer

A)  Stock is a form of debt financing.
B)  Stock must be repaid at maturity.
C)  Bonds are a form of debt financing.
D)  Bonds do not have to be repaid at maturity.
E)  Interest payments to bondholders are paid at the discretion of the board of directors.F) A) and B)
G) A) and E)

Question 7

If a bond is purchased at a price above the face value,the yield to maturity is:

Accepted Answer

A)  greater than the stated interest rate.
B)  the same as the stated interest rate.
C)  less than the stated interest rate.
D)  zero.
E)  of no significance.F) C) and D)
G) A) and C)

Question 8

Dave Harris has just purchased a bond with a face value of $1,000 that pays 6 percent.The purchase price of the bond was $900,and the bond will mature in 5 years.What is the yield to maturity for this bond?

Accepted Answer

A)  5.5 percent
B)  6.0 percent
C)  8.4 percent
D)  9.0 percent
E)  6.7 percentF) A) and D)
G) None of the above

Question 9

Generally,U.S.government securities issued by the Treasury Department:

Accepted Answer

A)  are not graded because they are risk-free for practical purposes.
B)  receive the Standard & Poor's AAA rating.
C)  receive the Moody's Aaa rating.
D)  receive The Wall Street Journal's U.S.Government rating.
E)  receive the Treasury Department's "risk-free" rating.F) None of the above
G) A) and C)

Question 10

The yield to maturity takes into account the relationship among a bond's maturity value,the time to maturity,the current price,and the dollar amount of interest.

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following statements is false?

Accepted Answer

A)  The U.S.government sells bonds to obtain financing.
B)  U.S.government Treasury securities carry a reduced risk of default.
C)  Interest on U.S.government securities is taxable for federal income tax purposes.
D)  Most individual investors that purchase Treasury bills, notes, and bonds bid competitively.
E)  Treasury securities may be purchased through banks or brokers.F) B) and C)
G) A) and C)

Question 12

A bond backed by the full faith,credit,and unlimited taxing power of the state or local government that issued it is called a ____________ bond.

Accepted Answer

A)  debenture
B)  mortgage
C)  secured
D)  general obligation
E)  revenueF) A) and B)
G) A) and C)

Question 13

Which one of the following bonds is most likely to have the highest interest rate? All of the bonds mature in 10 years.

Accepted Answer

A)  Bond that is rated CCC
B)  Mortgage bond that is rated AAA
C)  Debenture bond that is rated BBB
D)  Convertible bond that is rated BBB
E)  Bond that is rated AF) A) and E)
G) A) and B)

Question 14

Which of the following statements is true with respect to U.S.Treasury securities?

Accepted Answer

A)  Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.
B)  Typical maturities for treasury notes are 2, 3, 5, 7, and 10 years.
C)  Treasury bonds are issued in $5,000 units with 10-year maturities.
D)  The Treasury no longer issues Treasury bills.
E)  Treasury bills generally pay a higher interest rate than Treasury bonds.F) B) and E)
G) A) and B)

Question 15

For government bonds,the bid price is the maximum price that a buyer is willing to pay for a government security.

Accepted Answer

A) True 
 B)False

Question 16

Corporate and Treasury bonds generally produce more interest revenue than municipal bonds.Why do investors choose to buy municipal bonds?

Accepted Answer

Municipal bond income may be exempt from...

Question 17

Corporate bonds that pay higher interest but also have a higher risk of default are called:

Accepted Answer

A)  convertible bonds.
B)  high-yield bonds.
C)  mortgage bonds.
D)  serial bonds.
E)  debenture bonds.F) C) and E)
G) D) and E)

Question 18

If the current yield for a $1,000 corporate bond is 7.9 percent and it has a current market value of $950,then what is the annual income generated by the investment?

Accepted Answer

A)  $50
B)  $75
C)  $79
D)  $100
E)  $108F) A) and E)
G) A) and D)

Question 19

The highest bond rating issued by Standard & Poor's is:

Accepted Answer

A)  AAA.
B)  Aaa.
C)  A+.
D)  BB.
E)  Aa.F) C) and D)
G) A) and B)

Question 20

Which one of the following statements is true?

Accepted Answer

A)  All convertible corporate bonds are quality investments.
B)  Convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds.
C)  Because of the conversion feature, investors are attracted to the conservative gain that common stock conversion may provide.
D)  There is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value.
E)  Even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments.F) All of the above
G) C) and D)

Exam 15: Investing in Bonds

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Corporate bonds that pay higher interest but also have a higher risk of default are called:

Correct AnswerverifiedShow Answer

A bond backed by the full faith,credit,and unlimited taxing power of the state or local government that issued it is called a ____________ bond.

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The highest bond rating issued by Standard & Poor's is:

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What are the three ways to make money with a bond investment?

Correct Answerverified1.Interest income2....View AnswerShow Answer

If a bond is purchased at a price above the face value,the yield to maturity is:

Correct AnswerverifiedShow Answer

You are trying to evaluate two bond issues.One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback,would you purchase the "A" bond or the "B" bond?

Correct AnswerverifiedTo determine the quality and risk associ...View AnswerShow Answer

If the current yield for a $1,000 corporate bond is 7.9 percent and it has a current market value of $950,then what is the annual income generated by the investment?

Correct AnswerverifiedShow Answer

For government bonds,the bid price is the maximum price that a buyer is willing to pay for a government security.

Correct AnswerverifiedShow Answer

Dave Harris has just purchased a bond with a face value of $1,000 that pays 6 percent.The purchase price of the bond was $900,and the bond will mature in 5 years.What is the yield to maturity for this bond?

Correct AnswerverifiedShow Answer

Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest.What is the amount of interest that you receive each year?

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Corporate and Treasury bonds generally produce more interest revenue than municipal bonds.Why do investors choose to buy municipal bonds?

Correct AnswerverifiedMunicipal bond income may be exempt from...View AnswerShow Answer

Which one of the following bonds is most likely to have the highest interest rate? All of the bonds mature in 10 years.

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Which one of the following statements is correct?

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The yield to maturity takes into account the relationship among a bond's maturity value,the time to maturity,the current price,and the dollar amount of interest.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Generally,U.S.government securities issued by the Treasury Department:

Correct AnswerverifiedShow Answer

In the U.S.,bond price quotations are based on the price of a bond with no accrued or earned interest,which is called the:

Correct AnswerverifiedShow Answer

Which of the following statements is true with respect to U.S.Treasury securities?

Correct AnswerverifiedShow Answer

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1.Interest income
2....
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To determine the quality and risk associ...
View Answer

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Municipal bond income may be exempt from...
View Answer

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