Question 1

Assume that you purchase a $1,000 corporate bond that pays 10-3/4 percent interest. What is the amount of interest that you receive each year?

Accepted Answer

A)   $1,000
B)   $107.50
C)   $100
D)   $10
E)   $10.75F) A) and B)
G) C) and D)

Question 2

The type of bond that is not registered in the investor's name is a ___________ bond.

Accepted Answer

A)   revenue
B)   general obligation
C)   tax-exempt
D)   zero-coupon
E)   bearerF) B) and C)
G) A) and E)

Question 3

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)   money
C)   debenture
D)   indenture
E)   sinkingF) B) and D)
G) A) and C)

Question 4

What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $800?

Accepted Answer

A)   7 percent
B)   7.5 percent
C)   8.00 percent
D)   8.75 percent
E)   10 percentF) A) and C)
G) A) and B)

Question 5

A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.

Accepted Answer

A) True 
 B)False

Question 6

A corporate bond rated B by the DBRS would be suitable for:

Accepted Answer

A)   every investor.
B)   very cautious investors.
C)   speculators.
D)   no one because the bond issue is in default.
E)   knowledge investors.F) C) and D)
G) A) and E)

Question 7

Although there is a great deal of information on the Internet about stock investments, it is impossible to evaluate bonds using the Internet.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following methods could be used by an investor to obtain a corporation's annual report?

Accepted Answer

A)   the Internet
B)   a reader's service
C)   an 800 telephone number
D)   a written request
E)   the Internet, a reader's service, an 800 telephone number, and a written request could be used to obtain a corporation's annual report.F) A) and E)
G) A) and D)

Question 9

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

Accepted Answer

A) True 
 B)False

Question 10

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 11

A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders, with respect to both income and assets is called a(n) :

Accepted Answer

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

Question 12

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

Question 13

A government security issued in minimum units of $1,000 with maturities that are less than one year is called a:

Accepted Answer

A)   subordinated bond.
B)   treasury bond.
C)   treasury note.
D)   treasury bill.
E)   savings bond.F) None of the above
G) C) and D)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Melanie Nash owns one $1,000 corporate bond issued by Chevron. The bond pays 6.5 percent. If interest is paid semiannually, what is the amount of the cheque that Ms. Nash will receive at the end of each six-month period?

Accepted Answer

A)   $6.25
B)   $32.50
C)   $65
D)   $325
E)   $1,000F) B) and C)
G) D) and E)

Question 16

Phillip owns two (2)  $1,000 corporate bonds issued by Exxon. The bond pays 5 percent. If interest is paid semiannually, what is the amount of the cheque that Phillip will receive at the end of each six-month period?

Accepted Answer

A)   $5
B)   $10
C)   $50
D)   $100
E)   $1,000F) B) and E)
G) B) and D)

Question 17

What is the approximate market value for 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) C) and E)
G) D) and E)

Question 18

The dollar amount repaid at maturity on a bond is referred to as its __________________.

Accepted Answer

A)   Face value
B)   market value
C)   coupon payment
D)   capital gain
E)   future valueF) C) and E)
G) D) and E)

Question 19

The legal conditions for a corporate bond are described in the:

Accepted Answer

A)   bond indenture.
B)   bondholder's covenant.
C)   corporate charter.
D)   trustee contract.
E)   bond debenture.F) B) and C)
G) All of the above

Question 20

Assume that you purchased a $1,000 Rogers bond that pays 6 percent interest. What is the amount of interest you would receive each six months?

Accepted Answer

A)   $6.00
B)   $3.00
C)   $60.00
D)   $30.00
E)   $1,000F) D) and E)
G) A) and D)

Exam 12: Investing in Bonds

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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A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders, with respect to both income and assets is called a(n) :

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The dollar amount repaid at maturity on a bond is referred to as its __________________.

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A corporate bond rated B by the DBRS would be suitable for:

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A government security issued in minimum units of $1,000 with maturities that are less than one year is called a:

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Which of the following methods could be used by an investor to obtain a corporation's annual report?

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Although there is a great deal of information on the Internet about stock investments, it is impossible to evaluate bonds using the Internet.

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What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $800?

Correct AnswerverifiedShow Answer

The legal conditions for a corporate bond are described in the:

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A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.

Correct AnswerverifiedShow Answer

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

Correct AnswerverifiedShow Answer

Assume that you purchased a $1,000 Rogers bond that pays 6 percent interest. What is the amount of interest you would receive each six months?

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The type of bond that is not registered in the investor's name is a ___________ bond.

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

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

Correct AnswerverifiedShow Answer

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

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A call feature:

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Melanie Nash owns one $1,000 corporate bond issued by Chevron. The bond pays 6.5 percent. If interest is paid semiannually, what is the amount of the cheque that Ms. Nash will receive at the end of each six-month period?

Correct AnswerverifiedShow Answer

Assume that you purchase a $1,000 corporate bond that pays 10-3/4 percent interest. What is the amount of interest that you receive each year?

Correct AnswerverifiedShow Answer

Phillip owns two (2) $1,000 corporate bonds issued by Exxon. The bond pays 5 percent. If interest is paid semiannually, what is the amount of the cheque that Phillip will receive at the end of each six-month period?

Correct AnswerverifiedShow Answer

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