Question 1

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) C) and E)

Question 2

For government bonds, the bid price is the price that a dealer is willing to pay for a government security.

Accepted Answer

A) True 
 B)False

Question 3

The highest bond rating issued by Moody's is:

Accepted Answer

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

Question 4

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) A) and C)

Question 5

Treasury bonds are issued in $5,000 units with 10-year maturities.
T-bonds are issued in minimum units of $100 that have a 30-year maturity.

Accepted Answer

A) True 
 B)False

Question 6

June Tavia is trying to calculate the taxable equivalent yield for a municipal bond. If the bond she owns pays 4.5 percent interest and she is in the 25 percent tax bracket, what is the taxable-equivalent yield?

Accepted Answer

A)   4.50 percent
B)   5.50 percent
C)   6.00 percent
D)   7.72 percent
E)   6.93 percentF) C) and D)
G) A) and B)

Question 7

How do interest rates in the economy affect the price of a corporate bond?

Accepted Answer

The answer of How do interest rates in the economy...

Question 8

Which one of the following statements is true?

Accepted Answer

A)   All local newspapers contain information on bond prices.
B)   In bond quotations, prices are given as a percentage of the bond's face value.
C)   The face value for most corporate bonds is $5,000.
D)   To find the market price of a corporate bond, you must contact the corporation that originally issued the bond.
E)   To find the market price of a corporate bond, you must call a stockbroker.F) A) and C)
G) C) and D)

Question 9

A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

Accepted Answer

A) True 
 B)False

Question 10

The price at which a dealer is willing to sell a government security is known as the ____________ price.

Accepted Answer

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

Question 11

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) A) and D)
G) D) and E)

Question 12

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) B) and C)
G) All of the above

Question 13

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 E)
G) None of the above

Question 14

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) B) and E)
G) D) and E)

Question 15

For government bonds, the price that a dealer is willing to pay for a government security is called the:

Accepted Answer

A)   dirty price.
B)   asked price.
C)   bid price.
D)   clean price.
E)   None of these.F) None of the above
G) A) and B)

Question 16

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

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

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

Question 18

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 D)
G) A) and C)

Question 19

Tax-exempt bonds offer slightly higher interest rates than corporate bonds.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 15: Investing in Bonds

Tax-exempt bonds offer slightly higher interest rates than corporate bonds.

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

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A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

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How do interest rates in the economy affect the price of a corporate bond?

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For government bonds, the price that a dealer is willing to pay for a government security is called the:

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

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Treasury bonds are issued in $5,000 units with 10-year maturities. T-bonds are issued in minimum units of $100 that have a 30-year maturity.

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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?

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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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June Tavia is trying to calculate the taxable equivalent yield for a municipal bond. If the bond she owns pays 4.5 percent interest and she is in the 25 percent tax bracket, what is the taxable-equivalent yield?

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For government bonds, the bid price is the price that a dealer is willing to pay for a government security.

Correct AnswerverifiedShow Answer

The highest bond rating issued by Moody's is:

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The price at which a dealer is willing to sell a government security is known as the ____________ price.

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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?

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

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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?

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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?

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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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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?

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Which one of the following statements is true?

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