Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The sale of bonds can also improve a corporation's financial leverage.

Accepted Answer

A) True 
 B)False

Question 3

What financially independent firm acts as the bondholder's representative?

Accepted Answer

A)  Auditor
B)  Lawyer
C)  Trustee
D)  Executor
E)  Law enforcementF) C) and D)
G) B) and D) C

Question 4

The bond indenture is a legal document that details all of the conditions relating to a bond issue.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  bid
B)  asked
C)  contract
D)  government
E)  adjustedF) All of the above
G) B) and C)

Question 6

The yield on a 365 days T-Bill with a purchase price of $989.50 is 10.6%.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following differentiates a bond from a GIC? I.Only bonds are subject to price risk.
II) Only bonds can generate a capital gain.
III) Only bonds are marketable securities.

Accepted Answer

A)  I and II, only
B)  II and III, only
C)  I and III only
D)  I, II and III
E)  I onlyF) C) and D)
G) D) and E)

Question 8

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 E)
G) C) and D)

Question 9

What type of bond is not registered in the investor's name?

Accepted Answer

A)  Mortgage
B)  Collateral
C)  Convertible
D)  Callable
E)  BearerF) C) and D)
G) C) and E)

Question 10

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) A) and B)
G) A) and E)

Question 11

Based on the Dominion Bond Rating Service a bond with a rating of A has what type of credit?

Accepted Answer

A)  Highest
B)  Superior
C)  Good
D)  Adequate
E)  SpeculativeF) A) and C)
G) D) and E) C

Question 12

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

Question 13

Assume that you purchased a $1,000 Mobil Corporation bond that pays 8.25 percent interest.What is the amount of interest you would receive each six months?

Accepted Answer

A)  $4.125
B)  $8.25
C)  $82.50
D)  $41.25
E)  $1,000F) A) and C)
G) C) and D) D

Question 14

Sun Corporation wants to retire a $50 million bond issue before the maturity date.What is the typical call premium per bond that Sun Corporation must pay for the bonds to be called back?

Accepted Answer

A)  $100
B)  $10 - $50
C)  $20 - $75
D)  $50 - $100
E)  $1 - $10F) C) and D)
G) A) and B)

Question 15

The financially independent firm or individual that acts as the bondholders' representative is the:

Accepted Answer

A)  chairman of the board.
B)  president of the corporation.
C)  debenture holder.
D)  indenture holder.
E)  trustee.F) None of the above
G) A) and E)

Question 16

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 9 percent, what is the approximate market value for the 6 percent bond?

Accepted Answer

A)  $1,000
B)  $900
C)  $750
D)  $667
E)  $500F) B) and D)
G) A) and E)

Question 17

If a bond was quoted in the newspaper at 60, the price in dollars was:

Accepted Answer

A)  $6.00
B)  $60
C)  $600
D)  $1,000
E)  $1,060F) All of the above
G) None of the above

Question 18

A bond that is in the owner's name by the issuing company is called a ____________ bond.

Accepted Answer

A)  certified
B)  coupon
C)  registered
D)  zero-coupon
E)  general obligationF) B) and C)
G) A) and E)

Question 19

A bond with a price quotation of 100 sells for $100.

Accepted Answer

A) True 
 B)False

Question 20

Based on the Dominion Bond Rating Service a bond with a rating of BB has what type of credit?

Accepted Answer

A)  Highest
B)  Superior
C)  Good
D)  Adequate
E)  SpeculativeF) C) and D)
G) None of the above

Exam 12: Investing in Bonds

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

Correct AnswerverifiedShow Answer

The sale of bonds can also improve a corporation's financial leverage.

Correct AnswerverifiedShow Answer

What financially independent firm acts as the bondholder's representative?

Correct AnswerverifiedC

The bond indenture is a legal document that details all of the conditions relating to a bond issue.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The yield on a 365 days T-Bill with a purchase price of $989.50 is 10.6%.

Correct AnswerverifiedShow Answer

Which of the following differentiates a bond from a GIC? I.Only bonds are subject to price risk. II) Only bonds can generate a capital gain. III) Only bonds are marketable securities.

Correct AnswerverifiedShow Answer

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

What type of bond is not registered in the investor's name?

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

Based on the Dominion Bond Rating Service a bond with a rating of A has what type of credit?

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Assume that you purchased a $1,000 Mobil Corporation bond that pays 8.25 percent interest.What is the amount of interest you would receive each six months?

Correct AnswerverifiedD

Sun Corporation wants to retire a $50 million bond issue before the maturity date.What is the typical call premium per bond that Sun Corporation must pay for the bonds to be called back?

Correct AnswerverifiedShow Answer

The financially independent firm or individual that acts as the bondholders' representative is the:

Correct AnswerverifiedShow Answer

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 9 percent, what is the approximate market value for the 6 percent bond?

Correct AnswerverifiedShow Answer

If a bond was quoted in the newspaper at 60, the price in dollars was:

Correct AnswerverifiedShow Answer

A bond that is in the owner's name by the issuing company is called a ____________ bond.

Correct AnswerverifiedShow Answer

A bond with a price quotation of 100 sells for $100.

Correct AnswerverifiedShow Answer

Based on the Dominion Bond Rating Service a bond with a rating of BB has what type of credit?

Correct AnswerverifiedShow Answer

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C

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C

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D

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