Question 1

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

Accepted Answer

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

Question 2

Which one of the following is a 'junk' bond?

Accepted Answer

A)   Treasury bond
B)   Bond rated B by Standard and Poor's
C)   Bond rated AAA by Standard and Poor's
D)   Insured municipal bond
E)   Treasury bill

Question 3

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:

Accepted Answer

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

Question 4

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)   Investors purchase bonds for all of these reasons.

Question 5

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

Accepted Answer

A)   $800
B)   $900
C)   $1,000
D)   $1,125
E)   $1,600

Question 6

Maturity dates for intermediate term corporate bonds generally range from 5 to ___ years.

Accepted Answer

A)   10
B)   15
C)   20
D)   25
E)   30

Question 7

According to Moody's, bonds with extremely poor prospects of attaining any real investment standing are rated:

Accepted Answer

A)   $75.00.
B)   $88.00.
C)   $88.75.
D)   $887.50.
E)   $1,000.00.

Question 8

Dick Dowen just bought a bond that is only secured by the full faith and credit of the issuer. What type of bond has Dick purchased?

Accepted Answer

A)   Debenture
B)   Mortgage
C)   Convertible
D)   Callable
E)   High-yield

Question 9

Maturity dates for corporate bonds generally range from 5 to 10 years.

Accepted Answer

A) True 
 B)False

Question 10

All bonds in a serial bond issue mature on the same date.

Accepted Answer

A) True 
 B)False

Question 11

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 websites that provide information on bonds as compared to websites that provide information on stocks.
E)   All of the other answers are true.

Question 12

In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

Accepted Answer

A) True 
 B)False

Question 13

You own a $1,000 bond that pays 9.25 percent interest. What is the amount of interest you will receive each six months?

Accepted Answer

A)   $4.62
B)   $9.25
C)   $92.50
D)   $46.25
E)   $23.13

Question 14

Which one of the following is issued by state and local governments?

Accepted Answer

A)   Treasury bond
B)   Treasury bill
C)   Municipal bond
D)   Corporate bond
E)   Common stock

Question 15

The commission for purchasing a $1,000 bond would most likely be:

Accepted Answer

A)   $0.50.
B)   $1 to $2.
C)   $5 to $35.
D)   $35 to $50.
E)   over $50.

Question 16

If overall interest rates in the economy rise, 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.

Question 17

Scott Turner has a bond with 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $800. What is the yield-to-maturity on this bond?

Accepted Answer

A)   4.00 percent
B)   6.67 percent
C)   8.00 percent
D)   10.00 percent
E)   11.11 percent

Question 18

Today, bond ownership records are maintained using a process called:

Accepted Answer

A)   certified registration.
B)   book entry.
C)   revenue recognition process.
D)   coupon registration.
E)   general obligation process.

Question 19

The interest rate for a $1,000 bond is 6 percent. If comparable bonds are paying 8 percent, what is the approximate market value for of the 6 percent bond?

Accepted Answer

A)   $1,000
B)   $800
C)   $750
D)   $600
E)   $500

Question 20

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)   7.25 percent
B)   8.10 percent
C)   8.75 percent
D)   10.00 percent
E)   11.40 percent

Exam 15: Investing in Bonds

The commission for purchasing a $1,000 bond would most likely be:

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Maturity dates for corporate bonds generally range from 5 to 10 years.

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Scott Turner has a bond with 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $800. What is the yield-to-maturity on this bond?

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

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According to Moody's, bonds with extremely poor prospects of attaining any real investment standing are rated:

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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:

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Today, bond ownership records are maintained using a process called:

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

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All bonds in a serial bond issue mature on the same date.

Correct AnswerverifiedShow Answer

You own a $1,000 bond that pays 9.25 percent interest. What is the amount of interest you will receive each six months?

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Dick Dowen just bought a bond that is only secured by the full faith and credit of the issuer. What type of bond has Dick purchased?

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Maturity dates for intermediate term corporate bonds generally range from 5 to ___ years.

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Which one of the following statements is false?

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The interest rate for a $1,000 bond is 6 percent. If comparable bonds are paying 8 percent, what is the approximate market value for of the 6 percent bond?

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Which of the following reasons explain why investors purchase bonds?

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If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally:

Correct AnswerverifiedShow Answer

Which one of the following is a 'junk' bond?

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?

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Which one of the following is issued by state and local governments?

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In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

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