FIN3403 Exam 2 Questions And Answers.
Allison just received her semiannual payment of $35 on a bond she owns. Which term refers to this payment? - correct answerscoupon
Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal payment at maturity. What is the $1,000...
FIN3403 Exam 2 Questions And
Answers.
Allison just received her semiannual payment of $35 on a bond she owns. Which term refers to this
payment? - correct answerscoupon
Bert owns a bond that will pay him $75 each year in interest plus a $1,000 principal payment at maturity.
What is the $1,000 called? - correct answersface value
A bond's coupon rate is equal to the annual interest divided by which one of the following? - correct
answersface value
The bond principal is repaid on which one of these dates? - correct answersmaturity due
The bond market requires a return of 9.8 percent on the five-year bonds issued by JW Industries. The 9.8
percent is referred to as which one of the following? - correct answersyield to maturity
The current yield is defined as the annual interest on a bond divided by which one of the following? -
correct answersmarket price
Which one of these is most apt to be included in a bond's indenture one year after the bond has been
issued? - correct answersList of collateral used as bond security.
Road Hazards has 12-year bonds outstanding. The interest payments on these bonds are sent directly to
each of the individual bondholders. These direct payments are a clear indication that the bonds can
accurately be defined as being issued: - correct answersin registered form
A bond that is payable to whomever has physical possession of the bond is said to be in: - correct
answersbearer form
,Jason's Paints just issued 20-year, 7.25 percent, unsecured bonds at par. These bonds fit the definition of
which one of the following terms? - correct answersdebenture
A note is generally defined as: - correct answersAn unsecured bond with an initial maturity of 10 years or
less.
A sinking fund is managed by a trustee for which one of the following purposes? - correct answersearly
bond redemption
A bond that can be paid off early at the issuer's discretion is referred to as being which type of bond? -
correct answerscallable
A $1,000 face value bond can be redeemed early at the issuer's discretion for $1,030, plus any accrued
interest. The additional $30 is called the: - correct answerscall premium
A deferred call provision is which one of the following? - correct answersProhibition which prevents
bond issuers from redeeming callable bonds prior to a specified date.
A call-protected bond is a bond that: - correct answersCannot be called at this point in time.
The items included in an indenture that limit certain actions of the issuer in order to protect a
bondholder's interests are referred to as the: - correct answersprotective covenants
A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?
- correct answerszero coupon
Which one of the following is the price at which a dealer will sell a bond? - correct answersasked price
If you sell a 6 percent bond to a dealer when the market rate is 7 percent, which one of the following
prices will you receive? - correct answersbid price
, The difference between the price that a dealer is willing to pay and the price at which he or she will sell
is called the: - correct answersspread
A bond is quoted at a price of $1,011. This price is referred to as the: - correct answersclean price
Rosita paid a total of $1,189 to purchase a bond that has 7 of its initial 20 years left until maturity. This
price is referred to as the: - correct answersdirty price
Real rates are defined as nominal rates that have been adjusted for which of the following? - correct
answersinflation
Interest rates that include an inflation premium are referred to as: - correct answersnominal rates
The Fisher effect is defined as the relationship between which of the following variables? - correct
answersReal rates, inflation rates, and nominal rates
The pure time value of money is known as the: - correct answersTerm structure of interest rates.
Which one of the following premiums is compensation for the possibility that a bond issuer may not pay
a bond's interest or principal payments as expected? - correct answersdefault risk
The interest rate risk premium is the: - correct answersCompensation investors demand for accepting
interest rate risk.
A Treasury yield curve plots Treasury interest rates relative to which one of the following? - correct
answersmaturity
Which one of the following risk premiums compensates for the inability to easily resell a bond prior to
maturity? - correct answersliquidity
The taxability risk premium compensates bondholders for which one of the following? - correct answersa
bond's unfavorable tax status
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