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| 1 | |
Considering the time period since the Great Depression, the real push to raise capital by issuing junk bonds really began in the late 1970s. |
| | A) | True |
| | B) | False |
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| 2 | |
The call premium typically starts at 10 percent of par and decreases to zero with the passage of time. |
| | A) | True |
| | B) | False |
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| 3 | |
A call provision, but not a sinking fund, allows a company to retire its debt early. |
| | A) | True |
| | B) | False |
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| 4 | |
An upward sloping yield curve reflects investors' desire for compensation for interest rate risk. |
| | A) | True |
| | B) | False |
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| 5 | |
If you multiply a bond's current yield by its market price you get the: |
| | A) | yield to maturity. |
| | B) | investors' required rate of return. |
| | C) | annual coupon rate. |
| | D) | cost of capital. |
| | E) | annual coupon payment. |
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| 6 | |
You want to own equity in a foreign oil company, but no shares of stock are currently being offered for sale. If there are _____ for sale, you could purchase these and then trade them in for shares of stock. |
| | A) | convertible bonds |
| | B) | put bonds |
| | C) | debentures |
| | D) | zero coupon bonds |
| | E) | subordinated debentures |
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| 7 | |
Which of the following bonds can be terminated prior to maturity by the issuer?I. callable bond
II. bond with sinking fund provision
III. convertible bond
IV. put bond
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| | A) | I and II only |
| | B) | II and III only |
| | C) | III and IV only |
| | D) | I, II, and IV only |
| | E) | I, II, and III only |
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| 8 | |
Which one of the following items does NOT generally appear in a Wall Street Journal corporate bond quote? |
| | A) | estimated spread over a Treasury security |
| | B) | market price |
| | C) | yield-to-maturity |
| | D) | coupon rate |
| | E) | maturity date |
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| 9 | |
Which of the following factors affect the term structure of interest rates?I. expected rate of inflation
II. interest rate risk premium
III. real rate of interest
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| | A) | I only |
| | B) | II only |
| | C) | I and II only |
| | D) | I and III only |
| | E) | I, II, and III |
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| 10 | |
HomeSafe Cab Co. wants to issue new 10-year bonds to finance its expansion plans. Currently the company has 9 percent semiannual bonds selling for $1,067.95 that mature 10 years from now. What must the coupon rate of the new bonds be in order for the issue to sell at par if interest is paid semiannually? |
| | A) | 4.00 percent |
| | B) | 4.21 percent |
| | C) | 7.72 percent |
| | D) | 7.99 percent |
| | E) | 8.00 percent |
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