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| 1 | |
It is possible to just purchase the principal amount of a Treasury coupon bond. |
| | A) | True |
| | B) | False |
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| 2 | |
The yield to call (YTC) assumes a bond is called on the latest possible date. |
| | A) | True |
| | B) | False |
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| 3 | |
If you want to earn a guaranteed real rate of return, you should invest in Series EE savings bonds. |
| | A) | True |
| | B) | False |
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| 4 | |
The U. S. federal government: |
| | A) | issues Government Account Series bonds which are purchased by municipalities. |
| | B) | is the largest single borrower in the world. |
| | C) | issues Savings Bonds which are purchased by the Social Security Administration. |
| | D) | issues bonds with the smallest face amount being $5,000. |
| | E) | sells T-bills and T-notes on a discount basis and T-bonds on a coupon basis. |
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| 5 | |
Art originally purchased a T-note at a quoted price of 102:22. Today, he sold that note at a quoted price of 102:26. The face value is $1 million. What is the dollar amount of his capital gain or loss on this investment? |
| | A) | -$1,350 |
| | B) | -$750 |
| | C) | $875 |
| | D) | $1,250 |
| | E) | $1,750 |
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| 6 | |
U.S. agency debt: |
| | A) | has just as active of a secondary market as do Treasury securities. |
| | B) | has the same guarantees as U.S. Treasury debt. |
| | C) | is sold with the same dealer spread as Treasury debt. |
| | D) | pays a higher return than comparable Treasury debt. |
| | E) | pays interest which is taxed the same as the interest paid on Treasury debt. |
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| 7 | |
Municipal bond insurers: |
| | A) | insure all municipal bond issues. |
| | B) | tend to have relatively limited financial reserves. |
| | C) | tend to concentrate on bonds in one geographic area. |
| | D) | are selective in choosing which bond issues they will insure. |
| | E) | insure relatively few municipal bond issues today. |
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| 8 | |
A corporate bond is yielding 8.5 percent and a municipal bond is yielding 5.2 percent. What is the critical marginal tax rate? |
| | A) | 26.08 percent |
| | B) | 27.90 percent |
| | C) | 32.25 percent |
| | D) | 36.36 percent |
| | E) | 38.82 percent |
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| 9 | |
A municipal bond matures in 12 years, has a coupon rate of 5 percent, and pays interest semiannually. The face value is $5,000 and the yield to maturity is currently 5 percent. Suppose that the bond rating is downgraded and the price of the bond falls to $4,000. What will be the change in the yield to maturity? |
| | A) | 2.43 percent |
| | B) | 2.57 percent |
| | C) | 2.71 percent |
| | D) | 2.99 percent |
| | E) | The answer cannot be determined from the information provided. |
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| 10 | |
Which one of the following private activity bonds produces interest income which is tax- exempt at the federal level? |
| | A) | sports stadium bond |
| | B) | industrial park bond |
| | C) | convention center bond |
| | D) | nonvehicular mass commuting bond |
| | E) | parking garage bond |
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