Question 1

Maturity dates for intermediate term corporate bonds generally range from 3 to ________ years.

Accepted Answer

A)  10
B)  15
C)  20
D)  25
E)  30F) A) and E)
G) All of the above

Question 2

If the approximate market value for of a $1,000 corporate bond is $1,200 and it pays 6 percent interest,then what are comparable bonds paying?

Accepted Answer

A)  2 percent
B)  3 percent
C)  4 percent
D)  5 percent
E)  6 percentF) B) and E)
G) A) and B)

Question 3

A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.

Accepted Answer

A) True 
 B)False

Question 4

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) B) and E)
G) A) and C)

Question 5

Frank Riley just purchased a bond that is unsecured and is secondary to other unsecured bonds with respect to interest payments or repayment at maturity.What type of bond has Frank purchased?

Accepted Answer

A)  High-yield
B)  Subordinated debenture
C)  Convertible
D)  Callable
E)  MunicipalF) D) and E)
G) A) and C)

Question 6

For Moody's and Standard & Poor's,the first ________ bond-rating categories represent investments suitable for conservative investors who want a safe investment that provides a predictable source of income.

Accepted Answer

A)  two
B)  three
C)  four
D)  five
E)  sixF) A) and B)
G) D) and E)

Question 7

A provision in the bond indenture that forces the corporation to make arrangements for bond repayment before the maturity date is called a(n) ________ fund.

Accepted Answer

A)  serial
B)  sinking
C)  debenture
D)  indenture
E)  moneyF) A) and C)
G) C) and D)

Question 8

Why do corporations sell bonds?

Accepted Answer

A)  To increase their financial leverage
B)  To pay for major purchases
C)  Because they are finding it difficult or impossible to sell stock
D)  Because the interest is tax-deductible
E)  All of theseF) A) and B)
G) A) and C)

Question 9

A general obligation bond is a bond that is repaid from the income generated by the project it is designed to finance.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not true regarding Federal Agency debt issues from Fannie Mae or Ginnie Mae?

Accepted Answer

A)  Agency debt issues do not have the same guarantee as U.S.Treasury securities.
B)  Agency debt issues often have a slightly higher interest rate than U.S.Treasury securities.
C)  Agency debt issues are callable before the maturity date.
D)  Investing in agency debt issues is simpler than buying and selling U.S.Treasury securities.
E)  Agency debt issues are not sponsored by the U.S.government.F) B) and D)
G) C) and D)

Question 11

The yield to maturity takes into account the relationship of 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 12

XYZ Corporation wants to retire a $60 million bond issue before the maturity date.In order to call the bonds in this issue,the corporation must pay the bondholders the face value plus a premium.What is the typical premium for bonds that have been called?

Accepted Answer

A)  $100
B)  $50-$100
C)  $20-$75
D)  $10-$25
E)  $1-$10F) A) and B)
G) C) and D)

Question 13

Which one of the following statements is true?

Accepted Answer

A)  All metropolitan newspapers contain information on bonds.
B)  In bond quotations,prices are given as a percentage of the face value.
C)  The face value for most corporate bonds is $5,000.
D)  To find the actual price of a corporate bond,you must contact the corporation that originally issued the bond.
E)  To find the actual price of a corporate bond,you must call a stockbroker.F) C) and E)
G) B) and C)

Question 14

If overall interest rates in the economy rise,a corporate bond with a fixed interest rate will generally:

Accepted Answer

A)  increase in value.
B)  decrease in value.
C)  remain unchanged.
D)  become worthless.
E)  be returned to the corporation.F) A) and B)
G) A) and C)

Question 15

Today,almost all bond ownership records are maintained by a process called:

Accepted Answer

A)  certified registration.
B)  book entry.
C)  revenue recognition process.
D)  coupon registration.
E)  general obligation process.F) None of the above
G) All of the above

Question 16

Which of the following terms applies to a bond issue for which the corporation puts money aside at regular intervals for the purpose of redeeming the bonds?

Accepted Answer

A)  Serial
B)  Default
C)  Sinking fund
D)  Low-coupon
E)  ConvertibleF) A) and B)
G) C) and E)

Question 17

Because of the added security of collateral,the interest rates on ________ bonds are usually lower than interest rates on unsecured debenture bonds.

Accepted Answer

A)  debenture
B)  mortgage
C)  indenture
D)  preemptive
E)  subordinated debentureF) A) and D)
G) B) and D)

Question 18

How do interest rates in the economy affect the price of a corporate bond?

Accepted Answer

All bonds are issued with a stated face ...

Question 19

Which one of the following statements is true regarding bond characteristics?

Accepted Answer

A)  Corporate bonds do not have a maturity date.
B)  The maturity dates for corporate bonds are generally less than a year.
C)  Corporate bonds do not have to be repaid.
D)  Corporate bonds are a form of equity financing.
E)  Long-term corporate bonds have maturities over 10 years.F) A) and E)
G) None of the above

Question 20

The current yield for a corporate bond is determined by dividing the annual income amount by the current market value.

Accepted Answer

A) True 
 B)False

Exam 15: Investing in Bonds

Maturity dates for intermediate term corporate bonds generally range from 3 to ________ years.

Correct AnswerverifiedShow Answer

If the approximate market value for of a $1,000 corporate bond is $1,200 and it pays 6 percent interest,then what are comparable bonds paying?

Correct AnswerverifiedShow Answer

Which one of the following statements is true regarding bond characteristics?

Correct AnswerverifiedShow Answer

A general obligation bond is a bond that is repaid from the income generated by the project it is designed to finance.

Correct AnswerverifiedShow Answer

Which of the following is not true regarding Federal Agency debt issues from Fannie Mae or Ginnie Mae?

Correct AnswerverifiedShow Answer

The yield to maturity takes into account the relationship of 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

Which of the following terms applies to a bond issue for which the corporation puts money aside at regular intervals for the purpose of redeeming the bonds?

Correct AnswerverifiedShow Answer

If overall interest rates in the economy rise,a corporate bond with a fixed interest rate will generally:

Correct AnswerverifiedShow Answer

A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.

Correct AnswerverifiedShow Answer

Today,almost all bond ownership records are maintained by a process called:

Correct AnswerverifiedShow Answer

For Moody's and Standard & Poor's,the first ________ bond-rating categories represent investments suitable for conservative investors who want a safe investment that provides a predictable source of income.

Correct AnswerverifiedShow Answer

A provision in the bond indenture that forces the corporation to make arrangements for bond repayment before the maturity date is called a(n) ________ fund.

Correct AnswerverifiedShow Answer

The current yield for a corporate bond is determined by dividing the annual income amount by the current market value.

Correct AnswerverifiedShow Answer

Because of the added security of collateral,the interest rates on ________ bonds are usually lower than interest rates on unsecured debenture bonds.

Correct AnswerverifiedShow Answer

How do interest rates in the economy affect the price of a corporate bond?

Correct AnswerverifiedAll bonds are issued with a stated face ...View AnswerShow 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.

Correct AnswerverifiedShow Answer

XYZ Corporation wants to retire a $60 million bond issue before the maturity date.In order to call the bonds in this issue,the corporation must pay the bondholders the face value plus a premium.What is the typical premium for bonds that have been called?

Correct AnswerverifiedShow Answer

Frank Riley just purchased a bond that is unsecured and is secondary to other unsecured bonds with respect to interest payments or repayment at maturity.What type of bond has Frank purchased?

Correct AnswerverifiedShow Answer

Why do corporations sell bonds?

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All bonds are issued with a stated face ...
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