1. Which of the following is true of the structure of a zero-coupon bond? A. an

Question

1. Which of the following is true of the structure of a zero-coupon bond?

     A.   an annuity of interest payments and a single principal payment at maturity
     B.  no interim interest payments but a variable payment at maturity, depending on interest rates
     C.   an annuity of payments comprised of both interest and principal
     D.  no interim interest payments and a single payment at maturity

2. In an amortized loan, the principal portion:

       A. increases with every payment and is zero with the last payment.
       B. increases with every payment and completely repays the loan with the last payment.
      C.  increases with every payment but at a decreasing rate.
       D.  does not change with every payment.

3. The payment structure of a corporate bond is best thought of as:

       A. an annuity of interest payments.
        B.an annuity of principal and interest payments.
        C. an annuity of principal payments.
        D. an annuity of interest payments and a single principal payment at maturity.

4. Suppose a zero-coupon bond is selling for $614.00 today. It promises to pay $1,000 in exactly 10 years with annual compounding. Its annual rate of return would be about ____. (Points : 1)

      A.  4%
      B. 5%
     C.  6%
      D.  7%

5. Which of the following is NOT true of preferred stock? (Points : 1)

     A. Preferred stock generally pays a fixed dividend.
     B.   Preferred stock is a perpetuity.
     C.   Dividends on preferred stock are tax deductible.
     D.   Preferred stock dividends have a higher priority than common stock dividends.

1. Which of the following is true of the structure of a zero-coupon bond?

Explanation / Answer

I think that 1D 2A 3C 4B 5A

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