Question 1

The interest rate for a $1,000 bond is 9 percent.If comparable bonds are paying 7 percent,what is the approximate market value for of the 9 percent bond?

Accepted Answer

A)  $1,286
B)  $1,090
C)  $1,000
D)  $900
E)  $700F) A) and B)
G) C) and D)

Question 2

When investors purchase bonds that mature at regular intervals in order to balance risk and return,they are creating a:

Accepted Answer

A)  bond ladder.
B)  staggered investment program.
C)  incremental investment program.
D)  step-up allocation program.
E)  guaranteed investment program.F) B) and C)
G) A) and C)

Question 3

Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest.What is the amount of interest that you receive each year?

Accepted Answer

A)  $1,000.00
B)  $92.50
C)  $92.00
D)  $90.00
E)  $9.25F) B) and C)
G) C) and D)

Question 4

Which one of the following statements is true?

Accepted Answer

A)  Convertible corporate bonds are more secure than government bonds.
B)  Convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds.
C)  Because of the conversion feature,it is not necessary to evaluate convertible,corporate bonds.
D)  There is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value.
E)  Even if convertible bondholders convert their investment to common stock,the bondholders still receive interest payments.F) A) and E)
G) B) and C)

Question 5

A $l,000 corporate bond is convertible to 25 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Accepted Answer

A)  $10
B)  $20
C)  $30
D)  $40
E)  $50F) A) and E)
G) A) and B)

Question 6

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

Accepted Answer

The answer of What is the difference between a U.S.government...

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The highest bond rating issued by Standard & Poor's is:

Accepted Answer

A)  AAA.
B)  Aaa.
C)  A +.
D)  BB.
E)  Aa.F) A) and B)
G) A) and C)

Question 9

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 home page 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 Web sites that provide information on bonds as compared to Web sites that provide information on stocks.
E)  All of the other answers are truE.F) A) and B)
G) All of the above

Question 10

If a bond is purchased at a price above the face value,the yield to maturity is:

Accepted Answer

A)  greater than the stated interest rate.
B)  the same as the stated interest rate.
C)  less than the stated interest rate.
D)  zero.
E)  of no significancE.F) A) and B)
G) A) and C)

Question 11

Which of the following assets owned by a company can be used to secure a mortgage bond?

Accepted Answer

A)  real estate
B)  bonds
C)  stocks
D)  operating equipment
E)  all of the assets listed in the other answersF) C) and E)
G) D) and E)

Question 12

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 13

A government security issued in $100 units with maturities of more than one year but not more than ten years is called a:

Accepted Answer

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

Question 14

Which one of the following statements is false?

Accepted Answer

A)  The federal government sells bonds and securities to obtain financing.
B)  U.S.government Treasury securities carry a reduced risk of default when compared to corporate securities.
C)  U.S.government Treasury securities offer lower interest rates than corporate bonds.
D)  Most individual investors that purchase Treasury bills,notes,and bonds bid competitively.
E)  Treasury securities may be purchased through banks or brokers.F) A) and D)
G) A) and C)

Question 15

The only way an investor can make money on a bond investment is to hold the bond until maturity.

Accepted Answer

A) True 
 B)False

Question 16

Which one of the following bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.

Accepted Answer

A)  bond that is rated CCC
B)  mortgage bond that is rated AAA
C)  debenture bond that is rated BBB
D)  convertible bond that is rated BBB
E)  bond that is rated AF) B) and D)
G) B) and E)

Question 17

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

Accepted Answer

A)  bond that is rated CCC
B)  debenture bond rated BBB
C)  mortgage bond rated AAA
D)  convertible bond rated BBB
E)  high-yield bond rated CCCF) A) and B)
G) B) and C)

Question 18

If a bond is quoted in the newspaper at 88.75,the current price of a $1,000 face value bond is:

Accepted Answer

A)  $75.00
B)  $88.00
C)  $88.75
D)  $887.50
E)  $1,000.00F) B) and C)
G) A) and B)

Question 19

Which of the following reasons explain why investors purchase bonds?

Accepted Answer

A)  to provide asset allocation
B)  to produce income for current financial needs
C)  to match maturity dates with future financial needs
D)  to have a conservative investment during an economic downturn
E)  all of the reasons listed in the other answersF) B) and E)
G) B) and C)

Question 20

Because of higher interest rates,zero-coupon bonds are sold at a premium price above the face value that will be paid at maturity.

Accepted Answer

A) True 
 B)False

Exam 15: Investing in Bonds

Which one of the following bonds is most apt to have the highest interest rate? All of the bonds mature in 10 years.

Correct AnswerverifiedShow Answer

Which of the following assets owned by a company can be used to secure a mortgage bond?

Correct AnswerverifiedShow Answer

Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest.What is the amount of interest that you receive each year?

Correct AnswerverifiedShow Answer

Because of higher interest rates,zero-coupon bonds are sold at a premium price above the face value that will be paid at maturity.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Which of the following reasons explain why investors purchase bonds?

Correct AnswerverifiedShow Answer

The interest rate for a $1,000 bond is 9 percent.If comparable bonds are paying 7 percent,what is the approximate market value for of the 9 percent bond?

Correct AnswerverifiedShow Answer

A $l,000 corporate bond is convertible to 25 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Correct AnswerverifiedShow Answer

If a bond is quoted in the newspaper at 88.75,the current price of a $1,000 face value bond is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When investors purchase bonds that mature at regular intervals in order to balance risk and return,they are creating a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a bond is purchased at a price above the face value,the yield to maturity is:

Correct AnswerverifiedShow Answer

The highest bond rating issued by Standard & Poor's is:

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

A government security issued in $100 units with maturities of more than one year but not more than ten years is called a:

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

The only way an investor can make money on a bond investment is to hold the bond until maturity.

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified