Question 1

After you purchase an investment,you should

Accepted Answer

A)   Assume that your investment is tax-free.
B)   Monitor the value of your investment.
C)   Ignore other potential investments.
D)   Leave recordkeeping to the financial adviser.
E)   Let the investment manage itself.F) A) and B)
G) A) and E)

Question 2

Why do investors purchase corporate bonds?

Accepted Answer

A)   Dividend income
B)   Repayment at maturity
C)   Possible increase in value
D)   Dividend income and repayment at maturity
E)   Repayment at maturity and a possible increase in valueF) B) and C)
G) C) and D)

Question 3

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

Accepted Answer

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

Question 4

Corporations use bonds

Accepted Answer

A)   For financing ongoing business activities.
B)   When it is difficult to sell stock.
C)   To improve financial leverage.
D)   All of these are correct.
E)   None of these is correct.F) C) and E)
G) C) and D)

Question 5

Which of the following is not a rating agency for bonds?

Accepted Answer

A)   Moody's Investors Service
B)   Bond Rating Corporation
C)   Standard & Poor's Corporation
D)   Fitch Ratings Service
E)   Mergent, IncF) A) and E)
G) A) and D)

Question 6

After you invest,it is important to let the investments manage themselves.

Accepted Answer

A) True 
 B)False

Question 7

Municipal bonds generally are only tax-exempt at the state level.

Accepted Answer

A) True 
 B)False

Question 8

Government bonds have a higher potential investment income than stocks.

Accepted Answer

A) True 
 B)False

Question 9

Assume that you purchase a $1,000 bond issued by GE that pays 5% interest each year.What is the annual interest amount?

Accepted Answer

A)   $5.00
B)   $25.00
C)   $40.00
D)   $50.00
E)   $1,000F) D) and E)
G) A) and E)

Question 10

Using suggestions from financial experts like Suze Orman,calculate the amount of your assets that should be invested in growth investments as well as the amount to be invested in safer,conservative investments.Identify your assumptions and show your work.

Accepted Answer

Answers will vary based on the students'...

Question 11

You are considering an investment in a municipal bond that has a yield of 5%.Your tax rate is 25%.What is your taxable equivalent yield?

Accepted Answer

A)   0.75%
B)   4.75%
C)   5%
D)   5.25%
E)   6.67%F) A) and E)
G) C) and D)

Question 12

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) A) and C)

Question 13

Timothy Calibe is interested in purchasing an ABC bond that pays $60 interest per year.However,similar bonds pay interest of 8%.Approximately how much should Timothy be willing to pay for his ABC bond?

Accepted Answer

Approximate market value = Dol...

Question 14

Business failure risk can be due to

Accepted Answer

A)   A reduction in buying power.
B)   Changes in interest rates.
C)   Bad management and/or unsuccessful products.
D)   Political or social conditions.
E)   Predictable sources of income.F) None of the above
G) C) and D)

Question 15

It isn't important to know how much you owe in order to survive a financial crisis.

Accepted Answer

A) True 
 B)False

Question 16

Marissa Christianson is interested in buying a bond whose interest rate is 6% and current quote is 105.What is her current yield?

Accepted Answer

Current price = Quote × Face v...

Question 17

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 answer,would you purchase the "A" bond or the "B" bond?

Accepted Answer

To determine the quality and risk associ...

Question 18

Which of the following steps is NOT a factor to be considered before making your first investment?

Accepted Answer

A)   Work to balance your budget.
B)   Manage your credit card debt.
C)   Have access to other sources of cash for emergency needs.
D)   Save at least $10,000 to invest.
E)   Start an emergency fund.F) All of the above
G) A) and E)

Question 19

You are considering an investment in a municipal bond that has a yield of 4%.Your tax rate is 25%.What is your taxable equivalent yield?

Accepted Answer

A)   0.75%
B)   3.75%
C)   4%
D)   4.25%
E)   5.33%F) A) and E)
G) A) and B)

Question 20

Identify at least one advantage of investing in a corporate bond.

Accepted Answer

Bonds are safer than stock because bonds...

Exam 11: Investing Basics and Evaluating Bonds

After you invest,it is important to let the investments manage themselves.

Correct AnswerverifiedShow Answer

Which of the following is not a rating agency for bonds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

It isn't important to know how much you owe in order to survive a financial crisis.

Correct AnswerverifiedShow Answer

Which of the following steps is NOT a factor to be considered before making your first investment?

Correct AnswerverifiedShow Answer

You are considering an investment in a municipal bond that has a yield of 5%.Your tax rate is 25%.What is your taxable equivalent yield?

Correct AnswerverifiedShow Answer

Using suggestions from financial experts like Suze Orman,calculate the amount of your assets that should be invested in growth investments as well as the amount to be invested in safer,conservative investments.Identify your assumptions and show your work.

Correct AnswerverifiedAnswers will vary based on the students'...View AnswerShow Answer

You are considering an investment in a municipal bond that has a yield of 4%.Your tax rate is 25%.What is your taxable equivalent yield?

Correct AnswerverifiedShow Answer

Municipal bonds generally are only tax-exempt at the state level.

Correct AnswerverifiedShow Answer

After you purchase an investment,you should

Correct AnswerverifiedShow Answer

Government bonds have a higher potential investment income than stocks.

Correct AnswerverifiedShow Answer

Timothy Calibe is interested in purchasing an ABC bond that pays $60 interest per year.However,similar bonds pay interest of 8%.Approximately how much should Timothy be willing to pay for his ABC bond?

Correct AnswerverifiedApproximate market value = Dol...View AnswerShow Answer

Assume that you purchase a $1,000 bond issued by GE that pays 5% interest each year.What is the annual interest amount?

Correct AnswerverifiedShow Answer

Marissa Christianson is interested in buying a bond whose interest rate is 6% and current quote is 105.What is her current yield?

Correct AnswerverifiedCurrent price = Quote × Face v...View AnswerShow Answer

Corporations use bonds

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Identify at least one advantage of investing in a corporate bond.

Correct AnswerverifiedBonds are safer than stock because bonds...View AnswerShow 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 answer,would you purchase the "A" bond or the "B" bond?

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

Why do investors purchase corporate bonds?

Correct AnswerverifiedShow Answer

Business failure risk can be due to

Correct AnswerverifiedShow Answer

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Answers will vary based on the students'...
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Approximate market value = Dol...
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Correct Answer
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Current price = Quote × Face v...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Bonds are safer than stock because bonds...
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Correct Answer
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To determine the quality and risk associ...
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Correct Answer
verified

Correct Answer
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