Question 1

Bond interest payments are a tax-deductible business expense.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Bonds of a single issue that mature on different dates are called ____________ bonds.

Accepted Answer

A)  debenture
B)  mortgage
C)  sinking fund
D)  subordinate
E)  serialF) A) and B)
G) C) and E)

Question 5

Although unpopular a few years back,more and more corporations are issuing bearer bonds.

Accepted Answer

A) True 
 B)False

Question 6

Why do corporations sell bonds?

Accepted Answer

A)  To improve the firm's 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)  For all of the reasons listed in the other answers.F) A) and B)
G) A) and E)

Question 7

The quality rating given by Standard & Poor's to highly-speculative bonds is:

Accepted Answer

A)  high-grade.
B)  default.
C)  investment-grade.
D)  medium-grade.
E)  unrated.F) None of the above
G) A) and D)

Question 8

Doug Emery purchased a bond that can be exchanged for a set number of shares of the issuer's common stock.What type of bond has Doug purchased?

Accepted Answer

A)  debenture
B)  subordinated debenture
C)  convertible
D)  callable
E)  high-yieldF) A) and B)
G) B) and C)

Question 9

A call feature:

Accepted Answer

A)  allows bondholders to convert their bond to a specified number of shares of common stock.
B)  is not available on corporate bonds.
C)  allows the corporation to buy outstanding bonds from current bondholders before the maturity date.
D)  is only available with government securities.
E)  is guaranteed by the corporation.F) B) and D)
G) C) and E)

Question 10

If overall interest rates in the economy fall,then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

A) True 
 B)False

Question 11

Treasury bills:

Accepted Answer

A)  are rated by Moody's.
B)  pay interest every six months.
C)  are long-term securities issued by the federal government.
D)  are discounted securities.
E)  pay a higher interest rate than corporate bonds.F) B) and C)
G) None of the above

Question 12

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.

Accepted Answer

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

Question 13

Elizabeth Cherry has a bond that has 10 years to maturity,a face value of $1,000,an 8% interest rate,and a market price of $1,200.What is the yield-to- maturity on this bond?

Accepted Answer

A)  4.98 percent
B)  5.46 percent
C)  6.22 percent
D)  8.00 percent
E)  9.09 percentF) None of the above
G) A) and D)

Question 14

Insured municipal bonds offer slightly lower interest rates than uninsured bonds because of the reduced risk of default.

Accepted Answer

A) True 
 B)False

Question 15

A convertible bond:

Accepted Answer

A)  pays both interest and dividends simultaneously.
B)  pays no interest payments.
C)  can be repurchased by the issuer prior to maturity.
D)  can be exchanged for a set number of shares of common stock.
E)  is secured by the FDIC.F) B) and D)
G) A) and B)

Question 16

Dick Dowen just bought a bond that is only secured by the full faith and credit of the issuer.What type of bond has Dick purchased?

Accepted Answer

A)  debenture
B)  mortgage
C)  convertible
D)  callable
E)  high-yieldF) A) and B)
G) B) and C)

Question 17

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) B) and D)
G) A) and C)

Question 18

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Accepted Answer

A)  debenture
B)  mortgage
C)  indenture
D)  preemptive
E)  treasuryF) A) and B)
G) All of the above

Question 19

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

Accepted Answer

A)  Treasury bill
B)  municipal bond
C)  corporate bond
D)  government agency bond
E)  junk bondF) B) and D)
G) C) and D)

Question 20

Investors purchase corporate bonds for:

Accepted Answer

A)  interest income.
B)  possible increase in value.
C)  repayment at maturity.
D)  all of the other features listed
E)  none of the other features listedF) A) and E)
G) D) and E)

Exam 15: Investing in Bonds

Investors purchase corporate bonds for:

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A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n) ____________ fund.

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Bond interest payments are a tax-deductible business expense.

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A call feature:

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Treasury bills:

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

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The quality rating given by Standard & Poor's to highly-speculative bonds is:

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

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Bonds of a single issue that mature on different dates are called ____________ bonds.

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A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

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Dick Dowen just bought a bond that is only secured by the full faith and credit of the issuer.What type of bond has Dick purchased?

Correct AnswerverifiedShow Answer

If overall interest rates in the economy fall,then a corporate bond with a fixed interest rate will decrease in value.

Correct AnswerverifiedShow Answer

Doug Emery purchased a bond that can be exchanged for a set number of shares of the issuer's common stock.What type of bond has Doug purchased?

Correct AnswerverifiedShow Answer

Elizabeth Cherry has a bond that has 10 years to maturity,a face value of $1,000,an 8% interest rate,and a market price of $1,200.What is the yield-to- maturity on this bond?

Correct AnswerverifiedShow Answer

Why do corporations sell bonds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A convertible bond:

Correct AnswerverifiedShow Answer

Although unpopular a few years back,more and more corporations are issuing bearer bonds.

Correct AnswerverifiedShow Answer

Insured municipal bonds offer slightly lower interest rates than uninsured bonds because of the reduced risk of default.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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