Question 1 of 25 1.0 Points The rate of return required by investors for owning

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Question 1 of 25

1.0 Points

The rate of return required by investors for owning a bond to its maturity is called the

  

A. coupon rate.

  

B. current yield.

  

C. par rate.

  

D. yield to maturity.

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Question 2 of 25

1.0 Points

Which of the following statements regarding bond terminologies is INCORRECT?

  

A.

The written, legally binding agreement between the corporate borrower and
the lender detailing the terms of a bond issue is called the indenture.

  

B. The unsecured long-term debts of a firm are commonly called debentures.

  

C.

A special account that sets aside periodic payments for bond redemption is
called a sinking fund.

  

D.

An agreement giving the bond issuer the option to repurchase the bond at a
specified price prior to maturity is called the zero provision.

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Question 3 of 25

1.0 Points

Which of the following statements regarding bond trading is INCORRECT?

  

A. The long-term bonds issued by the U.S. government are called Treasury Bills.

  

B. The long-term bonds issued by state and local governments in the United
States are called municipal bonds.

  

C. A bond that makes no coupon payments (and thus is initially priced at a deep
discount) is called a zero coupon bond.

  

D. The price a dealer is willing to pay for a security is called the bid price.

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Question 4 of 25

1.0 Points

Which bond would most likely possess the least degree of interest rate risk?

  

A. 8% coupon rate, 15 years to maturity

  

B. 10% coupon rate, 10 years to maturity

  

C. 12% coupon rate, 8 years to maturity

  

D. 8% coupon rate, 12 years to maturity

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Question 5 of 25

1.0 Points

What is the value of a bond that will pay a total of 50 semiannual coupons of $80 each over the remainder of its life? The yield to maturity is 12%, p.a. Note: B = C [{1

Question 1 of 25

1.0 Points

The rate of return required by investors for owning a bond to its maturity is called the

  

A. coupon rate.

  

B. current yield.

  

C. par rate.

  

D. yield to maturity.

Reset Selection

  Mark for Review What's This?

Question 2 of 25

1.0 Points

Which of the following statements regarding bond terminologies is INCORRECT?

  

A.

The written, legally binding agreement between the corporate borrower and
the lender detailing the terms of a bond issue is called the indenture.

  

B. The unsecured long-term debts of a firm are commonly called debentures.

  

C.

A special account that sets aside periodic payments for bond redemption is
called a sinking fund.

  

D.

An agreement giving the bond issuer the option to repurchase the bond at a
specified price prior to maturity is called the zero provision.

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  Mark for Review What's This?

Question 3 of 25

1.0 Points

Which of the following statements regarding bond trading is INCORRECT?

  

A. The long-term bonds issued by the U.S. government are called Treasury Bills.

  

B. The long-term bonds issued by state and local governments in the United
States are called municipal bonds.

  

C. A bond that makes no coupon payments (and thus is initially priced at a deep
discount) is called a zero coupon bond.

  

D. The price a dealer is willing to pay for a security is called the bid price.

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Question 4 of 25

1.0 Points

Which bond would most likely possess the least degree of interest rate risk?

  

A. 8% coupon rate, 15 years to maturity

  

B. 10% coupon rate, 10 years to maturity

  

C. 12% coupon rate, 8 years to maturity

  

D. 8% coupon rate, 12 years to maturity

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Question 5 of 25

1.0 Points

What is the value of a bond that will pay a total of 50 semiannual coupons of $80 each over the remainder of its life? The yield to maturity is 12%, p.a. Note: B = C [{1

Explanation / Answer

Solution:

1. Option D.) Yield to Maturity.

Yield to Maturity (YTM) is the measure of the yield that is expected from a bond if its held till maturity. The YTM differs from time-to-time and for varying periods of bond maturities, based on market scenarios.

2. Option D.) An agreement giving the bond issuer the option to repurchase the bond at a
specified price prior to maturity is called the zero provision.

An agreement giving the bond issuer the option to repurchase the bond at a specified price prior to maturity is called the call provision.

3. Option A.) The long-term bonds issued by the U.S. government are called Treasury Bills.

Treasury Bills are the short-term bonds issued by the U.S government, while, the long-term bonds are called treasury bonds.

4. Option A.) 8% coupon rate, 15 years to maturity.

The bond with the longest maturity having the lowest interest rate is the on which will always be the least riskier among the listed bonds.

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