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- 1. Multiple Choice
Long-term bonds are ... than short-term bonds.
more liquid
less risky
less sensitive to interest rate changes
subject to more uncertainty
- 2. Multiple Choice
If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount.
True
False
- 3. Multiple Choice
As a bond approaches its maturity date, its price necessarily approaches par value.
True
False
- 4. Multiple Choice
Which of the following statements is FALSE regarding bonds?
If the par value is lower than the market price, then the yield-to-maturity must be lower than the coupon rate.
If the market price is lower than the par value, then the coupon rate must be lower than the yield-to-maturity.
Both A and B are false.
None of the above are false.
- 5. Multiple Choice
When the price of bond is calculated below its par value, it is classified as...
classified bond
discount bond
compound bond
consideration earnings
- 6. Multiple Choice
What is a bond?
an agreement or friendship
binding security
something that binds, fastens, confines, or holds together
a type of debt a company issues to investors
- 7. Multiple Choice
When you purchase a municipal bond, you are:
buying a portion of a municipality
diversifying your portfolio
investing in an index fund
loaning money to a municipality
- 8. Multiple Choice
A bond issued by a corporation is called a ________ .
corporate bond
market share
stock option
share of stock
- 9. Multiple Choice
The rate of interest on a bond is called the ________ .
bond rate
coupon rate
discount rate
interest rate
- 10. Multiple Choice
A-15 year bond pays 11% on a face value of $1,000. If similar bonds are currently yielding 8%, what is the market value of the bond? Use annually.
Equal $1,000
Under $1,000
Over $1,200
Not enough information to tell
- 11. Multiple Choice
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
- 12. Multiple Choice
What is the value of zero coupon bond sold @ 800 maturity 7 years form now discount rate 14%
5600
450
399
1000
- 13. Multiple Choice
What will the straight value of a bond with a coupon rate of 8%, and a market rate of
not enough information
at a premium
at a discount
at par (or face value)
- 14. Multiple Choice
What is a coupon?
something you use in a supermarket to decrease your cost
an asset bought in the stock market
used in the stock market to lessen the initial cost of stocks
the interest rate on a bond at the time it is issued
- 15. Multiple Choice
If a coupon rate is 10%, how much would a semi-annual coupon payment be?
$25
$50
$100
$1000
- 16. Multiple Choice
If a bond was issued with a 5% coupon rate and the market rate is now 8%, the coupon payment:
Goes up
Goes down
Stays the same
Coupon for what?
- 17. Multiple Choice
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
- 18. Multiple Choice
What will happen to the market value of a bond if interest rates rise?
market value will decrease
market value will increase
Stay the same
No idea
- 19. Multiple Choice
A bond which has a yield to maturity greater than its coupon rate will sell for a price
below par
at par
above par
equal to face value of bond plus the interest payments
- 20. Multiple Choice
What is usually the relationship between a bond's rating and the interest rate a
the rating is the same as the rate
Higher ratings mean lower interest
there is no relationship
higher ratings mean higher interest
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