 |
| 1 | |
For a bond, the required return is equal to the yield-to-maturity which is equal to the market rate. |
| | A) | True |
| | B) | False |
|
|
|
| 2 | |
In common usage, "short-term" debt refers to debt with a maturity of one year or less. |
| | A) | True |
| | B) | False |
|
|
|
| 3 | |
A bond sold five weeks ago for $1,098. The bond is worth $1,047 in today's market. Assuming no changes in risk, which one of the following is true? |
| | A) | The face value of the bond must be $1,100. |
| | B) | The bond must be within one year of maturity. |
| | C) | Interest rates must be lower now than they were five weeks ago. |
| | D) | The bond's current yield has increased from five weeks ago. |
| | E) | The coupon payment of the bond must have increased. |
|
|
|
| 4 | |
The written agreement between the corporation and its bondholders is called a(n): |
| | A) | indenture. |
| | B) | protective covenant. |
| | C) | premium contract. |
| | D) | security agreement. |
| | E) | marketing agreement. |
|
|
|
| 5 | |
You want to own equity in a Russian oil firm, but the firm does not have traded stock. If it had _____ outstanding you could purchase them and then trade them in for shares of stock. |
| | A) | convertible bonds |
| | B) | put bonds |
| | C) | debentures |
| | D) | zero-coupon bonds |
| | E) | subordinated debentures |
|
|
|
| 6 | |
Which of the following can occur prior to the maturity date of a bond?
I. An income bond can be terminated (repaid) by the issuer.
II. A convertible bond can be terminated (converted) by the investor.
III. A put bond can be terminated (put) by the investor.
IV. A bond with a sinking fund can be terminated (repaid) by the bond trustee. |
| | A) | I and IV only |
| | B) | II and IV only |
| | C) | I, II, and III only |
| | D) | I, II, and IV only |
| | E) | II, III, and IV only |
|
|
|
| 7 | |
If a firm is allowed to miss a coupon payment on a bond in a year in which it reports an operating loss, the bond is most likely a(n) _____ bond. |
| | A) | income |
| | B) | zero-coupon |
| | C) | puttable |
| | D) | floating-rate |
| | E) | callable |
|
|
|
| 8 | |
The relationship between nominal returns, real returns, and inflation is best described by: |
| | A) | the required rate of return. |
| | B) | a bond's yield to maturity. |
| | C) | the term structure of interest rates. |
| | D) | the risk premium. |
| | E) | the Fisher effect. |
|
|
|
| 9 | |
The _____ is known as the term structure of interest rates. |
| | A) | inflation premium |
| | B) | interest rate risk premium |
| | C) | Fisher effect |
| | D) | relationship between short and long-term interest rates |
| | E) | municipal bond yield curve |
|
|
|
| 10 | |
If investors require a 7 percent nominal return and the expected inflation rate is 3 percent, what is the expected real return? |
| | A) | 1.04 percent |
| | B) | 3.00 percent |
| | C) | 3.88 percent |
| | D) | 4.25 percent |
| | E) | 10.21 percent |
|
|
.