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Exam 15: Investing in Bonds

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Question 61

Multiple Choice

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The financially independent firm or individual that acts as the bondholders' representative is the:

A) chairman of the board.
B) president of the corporation.
C) debenture holder.
D) indenture holder.
E) trustee.

F) C) and D)
G) A) and D)

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Question 62

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Interest payments for registered bonds are usually mailed directly to the bondholder of record.

A) True
B) False

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Question 63

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Which one of the following bonds pays interest only at maturity?

The legal conditions for a corporate bond are described in the:

Dave Johnson's objective was to purchase a government bond that provided some protection against inflation and higher prices. To fulfill this objective, John purchased a:

A ______ is a financially independent firm that acts as the bondholder's representative.

Frank Riley just purchased a bond that is unsecured and is secondary to other unsecured bonds should the issuer declare bankruptcy. What type of bond has Frank purchased?

Anyone who is in physical possession of a bearer bond can collect interest payments and the face value of the bond at maturity regardless of whether or not they are the rightful owner.

A subordinated debenture is a more secure investment than a mortgage bond.

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?

In what ways can a bond investor make money?

If your primary goal is current yield, which one of these bonds is the wiser investment? Bond A: $1,000 corporate bond that pays 7 percent and has a current market value of $800; or Bond B: $1,000 corporate bond that pays 8.25 percent and has a current market value of $950?

A general obligation bond is a bond that is repaid from the income generated by the project it is designed to finance. Issued in minimum units of $100 that have a 30-year maturity date.

A sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue.

Which of the following bonds would have the lowest interest rate? All of the bonds have 10 years to maturity.

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.

A government security issued in minimum units of $100 with maturities that are one year or less is called a:

With a registered coupon bond, only the registered owner can collect the principal at maturity, but interest payments can be paid to anyone.

A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.

What is the difference between a U.S. government Treasury bill, Treasury note, and Treasury bond?