Question 1

Most corporate bonds have a maturity between 2 and 7 years.

Accepted Answer

A) True 
 B)False

Question 2

If interest rates suddenly ____, those existing bonds that have a call feature are ____ likely to be called.

Accepted Answer

A)  decline; more
B)  decline; less
C)  increase; more
D)  None of these are correct.

Question 3

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury. ​

Accepted Answer

A)  annual
B)  semiannual
C)  quarterly
D)  monthly

Question 4

The yield to investors on Treasury bonds reflects the risk-free rate because these bonds are virtually free from credit (default)risk.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT an advantage of online bond brokerage services?

Accepted Answer

A)  Pricing is more transparent because investors can easily compare bid and ask spreads.
B)  Some services charge commissions, which may be more easily understood than bid and ask spreads.
C)  Some brokers have narrowed their spreads so that they do not lose business to competitors.
D)  All of these are advantages of online bond brokerage services.

Question 6

Inflation-indexed Treasury bonds are intended for investors who wish to ensure that the returns on their investments keep up with the increase in prices over time.

Accepted Answer

A) True 
 B)False

Question 7

The Financial Reform Act of 2010 established the __________ to provide oversight for credit rating agencies. ​

Accepted Answer

A)  Federal Ratings Bureau
B)  Office of Credit Ratings
C)  Office of Agency Supervision
D)  Ratings Oversight Commission

Question 8

The yield to maturity is the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering.

Accepted Answer

A) True 
 B)False

Question 9

For bonds issued under a _______ arrangement, the underwriter attempts to sell the bonds at a specified price but makes no guarantee to the issuer. ​

Accepted Answer

A)  floating value
B)  variable proceeds
C)  best efforts
D)  firm commitment

Question 10

Note maturities are usually ____, while bond maturities are ____.

Accepted Answer

A)  less than 10 years; 10 years or more
B)  10 years or more; less than 10 years
C)  less than 5 years; 5 years or more
D)  5 years or more; less than 5 years

Question 11

Subordinated indentures have claims against the firm's assets that are junior to the claims of both mortgage bonds and regular indentures.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT true regarding the call provision?

Accepted Answer

A)  It typically requires a firm to pay a price above par value when it calls its bonds.
B)  The difference between the market value of the bond and the par value is called the call premium.
C)  A principal use of the call provision is to lower future interest payments.
D)  A principal use of the call provision is to retire bonds as required by a sinking-fund provision.
E)  A call provision is normally viewed as a disadvantage to bondholders.

Question 13

Which of the following is NOT true regarding zero-coupon bonds?

Accepted Answer

A)  They are issued at a deep discount from par value.
B)  Investors are taxed annually on the amount of interest earned, even though they will not receive the interest until maturity.
C)  The issuing firm is permitted to deduct the amortized discount as interest expense, even though it does not pay interest.
D)  Zero-coupon bonds pay dividends instead of coupons.
E)  All of these are correct.

Question 14

Which of the following statements is true regarding STRIPS?

Accepted Answer

A)  They are issued by the Treasury.
B)  They are created and sold by various financial institutions.
C)  They are not backed by the U.S. government.
D)  They have to be held until maturity.
E)  All of these are true regarding STRIPS.

Question 15

Which of the following is NOT likely to be an example of a protective covenant provision?

Accepted Answer

A)  a limit on the amount of dividends a firm can pay
B)  a limit on the corporate officers' salaries a firm can pay
C)  a limit on the amount of additional debt a firm can issue
D)  a call feature

Question 16

Leveraged buyouts are commonly financed by the issuance of

Accepted Answer

A)  money market securities.
B)  Treasury bonds.
C)  corporate bonds.
D)  municipal bonds.

Question 17

Corporate bonds usually pay interest on an annual basis.

Accepted Answer

A) True 
 B)False

Question 18

A variable-rate bond allows

Accepted Answer

A)  investors to benefit from declining rates over time.
B)  issuers to benefit from rising market interest rates over time.
C)  investors to benefit from rising market interest rates over time.
D)  None of these are correct.

Exam 7: Bond Markets

Subordinated indentures have claims against the firm's assets that are junior to the claims of both mortgage bonds and regular indentures.

Correct Answer
verified

Which of the following is NOT an advantage of online bond brokerage services?

Correct Answer
verified

A variable-rate bond allows

Correct Answer
verified

Leveraged buyouts are commonly financed by the issuance of

Correct Answer
verified

Inflation-indexed Treasury bonds are intended for investors who wish to ensure that the returns on their investments keep up with the increase in prices over time.

Correct Answer
verified

Most corporate bonds have a maturity between 2 and 7 years.

Correct Answer
verified

Which of the following statements is true regarding STRIPS?

Correct Answer
verified

If interest rates suddenly , those existing bonds that have a call feature are likely to be called.

Correct Answer
verified

Which of the following is NOT true regarding the call provision?

Correct Answer
verified

The Financial Reform Act of 2010 established the __________ to provide oversight for credit rating agencies.

Correct Answer
verified

The yield to maturity is the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering.

Correct Answer
verified

Which of the following is NOT true regarding zero-coupon bonds?

Correct Answer
verified

Which of the following is NOT likely to be an example of a protective covenant provision?

Correct Answer
verified

Note maturities are usually , while bond maturities are .

Correct Answer
verified

For bonds issued under a _______ arrangement, the underwriter attempts to sell the bonds at a specified price but makes no guarantee to the issuer.

Correct Answer
verified

Corporate bonds usually pay interest on an annual basis.

Correct Answer
verified

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury.

Correct Answer
verified

The yield to investors on Treasury bonds reflects the risk-free rate because these bonds are virtually free from credit (default)risk.

Correct Answer
verified

Exam 7: Bond Markets

Subordinated indentures have claims against the firm's assets that are junior to the claims of both mortgage bonds and regular indentures.

Correct AnswerverifiedShow Answer

Which of the following is NOT an advantage of online bond brokerage services?

Correct AnswerverifiedShow Answer

A variable-rate bond allows

Correct AnswerverifiedShow Answer

Leveraged buyouts are commonly financed by the issuance of

Correct AnswerverifiedShow Answer

Inflation-indexed Treasury bonds are intended for investors who wish to ensure that the returns on their investments keep up with the increase in prices over time.

Correct AnswerverifiedShow Answer

Most corporate bonds have a maturity between 2 and 7 years.

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding STRIPS?

Correct AnswerverifiedShow Answer

If interest rates suddenly ____, those existing bonds that have a call feature are ____ likely to be called.

Correct AnswerverifiedShow Answer

Which of the following is NOT true regarding the call provision?

Correct AnswerverifiedShow Answer

The Financial Reform Act of 2010 established the __________ to provide oversight for credit rating agencies. ​

Correct AnswerverifiedShow Answer

The yield to maturity is the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering.

Correct AnswerverifiedShow Answer

Which of the following is NOT true regarding zero-coupon bonds?

Correct AnswerverifiedShow Answer

Which of the following is NOT likely to be an example of a protective covenant provision?

Correct AnswerverifiedShow Answer

Note maturities are usually ____, while bond maturities are ____.

Correct AnswerverifiedShow Answer

For bonds issued under a _______ arrangement, the underwriter attempts to sell the bonds at a specified price but makes no guarantee to the issuer. ​

Correct AnswerverifiedShow Answer

Corporate bonds usually pay interest on an annual basis.

Correct AnswerverifiedShow Answer

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury. ​

Correct AnswerverifiedShow Answer

The yield to investors on Treasury bonds reflects the risk-free rate because these bonds are virtually free from credit (default)risk.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If interest rates suddenly , those existing bonds that have a call feature are likely to be called.

Correct Answer
verified

Correct Answer
verified

The Financial Reform Act of 2010 established the __________ to provide oversight for credit rating agencies.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Note maturities are usually , while bond maturities are .

Correct Answer
verified

For bonds issued under a _______ arrangement, the underwriter attempts to sell the bonds at a specified price but makes no guarantee to the issuer.

Correct Answer
verified

Correct Answer
verified

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury.

Correct Answer
verified

Correct Answer
verified