Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The minimum price at which a seller is willing to receive for a government security is known as the ____________ price.

Accepted Answer

A)  bid
B)  ask
C)  contract
D)  government
E)  adjustedF) A) and C)
G) C) and D)

Question 3

What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Accepted Answer

A)  $80
B)  $90
C)  $889
D)  $1,000
E)  $1,125F) A) and E)
G) A) and D)

Question 4

Which one of the following statements is false?

Accepted Answer

A)  It is possible to obtain information about a corporation that issues a bond by accessing the corporation's website on the internet.
B)  Price information about corporate bonds is available on the internet.
C)  You can research bonds online but you cannot trade them online.
D)  There are fewer websites that provide information on bonds as compared to websites that provide information on stocks.
E)  Many of the better bond websites charge a fee to access their research,F) A) and D)
G) B) and E)

Question 5

Which of the following is the process of spreading your money among several different types of investments to lessen risk.

Accepted Answer

A)  book entry
B)  professional management
C)  asset allocation
D)  bond laddering
E)  dollar appreciationF) B) and C)
G) C) and E)

Question 6

An issue of serial bonds:

Accepted Answer

A)  will pay no interest payments.
B)  will have varying issue dates.
C)  will have a series of maturity dates.
D)  cannot be called.
E)  will all mature ten years from the date of issue.F) A) and B)
G) A) and C)

Question 7

Why do corporations sell bonds?

Accepted Answer

A)  To improve 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 E)
G) A) and D)

Question 8

Which one of the following bonds would likely have the lowest risk?

Accepted Answer

A)  Treasury bill
B)  Municipal bond
C)  Common stock
D)  Government agency bond
E)  Junk bondF) C) and D)
G) A) and C)

Question 9

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) A) and C)

Question 10

If a bond is quoted in the newspaper at 105,the current price of a $1,000 face value bond is:

Accepted Answer

A)  $50.00.
B)  $95.00.
C)  $950.00.
D)  $1,050.00 .
E)  $1,000.00.F) B) and E)
G) All of the above

Question 11

If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $750,then what is the annual interest on the bond?

Accepted Answer

A)  $30
B)  $60
C)  $75
D)  $80
E)  $100F) B) and D)
G) D) and E)

Question 12

A government security issued in minimum units of $100 with a 30-year maturity is called a:

Accepted Answer

A)  subordinated bond.
B)  Treasury bill.
C)  Treasury note.
D)  Treasury bond.
E)  savings bond.F) A) and B)
G) A) and E)

Question 13

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

Accepted Answer

A)  chairman of the board.
B)  president of the corporation.
C)  debenture holder.
D)  indenture holder.
E)  trustee.F) All of the above
G) B) and E)

Question 14

A bond that is backed only by the reputation of the issuing corporation is called a ____________ bond.

Accepted Answer

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

Question 15

A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments,repayment,and assets is called a:

Accepted Answer

A)  debenture bond.
B)  mortgage bond.
C)  subordinated debenture.
D)  preemptive bond.
E)  treasury bond.F) A) and D)
G) A) and C)

Question 16

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

Accepted Answer

A)  certified registration.
B)  book entry.
C)  revenue recognition process.
D)  coupon registration.
E)  general obligation process.F) A) and B)
G) A) and E)

Question 17

High-yield (junk) bonds are sold by companies:

Accepted Answer

A)  with a poor earnings history.
B)  with a questionable credit record.
C)  with lower ratings by major rating services.
D)  that are newer and have unproven ability to increase sales and earn profits.
E)  All of these.F) C) and D)
G) A) and E)

Question 18

If overall interest rates in the economy fall,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) C) and D)
G) B) and C)

Question 19

The ______ is the dollar amount the bondholder will receive at the bond's maturity.

Accepted Answer

A)  annual interest.
B)  semiannual interest.
C)  premium.
D)  face value
E)  commission.F) B) and E)
G) C) and D)

Question 20

Which of the following statements is not true about Treasury Inflation-Protected Securities?

Accepted Answer

A)  They are currently sold with 5-, 10-, and 30-year maturities.
B)  The amount of principal increases with inflation and decreases with deflation.
C)  They pay interest twice a year, at a fixed rate.
D)  They can be held until maturity or sold before maturity.
E)  Interest income and growth in principal are exempt from federal income tax.F) None of the above
G) A) and B)

Exam 15: Investing in Bonds

An issue of serial bonds:

Correct AnswerverifiedShow Answer

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

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

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The minimum price at which a seller is willing to receive for a government security is known as the ____________ price.

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High-yield (junk) bonds are sold by companies:

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Which of the following statements is not true about Treasury Inflation-Protected Securities?

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A government security issued in minimum units of $100 with a 30-year maturity is called a:

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

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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.

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Which one of the following statements is false?

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If a bond is quoted in the newspaper at 105,the current price of a $1,000 face value bond is:

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The ______ is the dollar amount the bondholder will receive at the bond's maturity.

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Why do corporations sell bonds?

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Which of the following is the process of spreading your money among several different types of investments to lessen risk.

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What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Correct AnswerverifiedShow Answer

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

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If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $750,then what is the annual interest on the bond?

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A bond that is backed only by the reputation of the issuing corporation is called a ____________ bond.

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Which one of the following bonds would likely have the lowest risk?

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A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments,repayment,and assets is called a:

Correct AnswerverifiedShow Answer

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