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SERIES 65 Chapter 2 part 1 || A+ Graded Already.
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ABC Corporation's 5% mortgage bond is currently trading at a premium. The bond is callable at par in 10 years and matures in 15 years. When comparing the returns available to an investor, it would be accurate to state correct answers the yield to maturity is higher than the yield to call. All of...

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  • September 5, 2024
  • 10
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • abc corporations 5 mortgage bond is currently tr

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  • SERIES 65 Chapter 2
  • SERIES 65 Chapter 2

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SERIES 65 Chapter 2 part 1 || A+ Graded Already.
ABC Corporation's 5% mortgage bond is currently trading at a premium. The bond is callable at
par in 10 years and matures in 15 years. When comparing the returns available to an investor, it
would be accurate to state correct answers the yield to maturity is higher than the yield to call.

All of the following are true of negotiable, jumbo certificates of deposit except correct answers
they are secured obligations of the issuing bank.

The market price of a convertible bond depends on all of the following except correct answers
the conversion prices of bonds from similar companies.

Which of the following U.S. government securities do not bear a stated interest rate but are sold
at a discount through weekly auctions? correct answers Treasury bills

BFJ Corp.'s 5% convertible bond is trading at 120. The bond is convertible at $50. An investor
buying the bond now and immediately converting into common stock would receive correct
answers 20 shares.

High-yield bonds are frequently called junk bonds. Which of the following expresses the highest
rating that would apply to a junk bond? correct answers BB

An investor purchases a Treasury note and the confirmation shows a price of 102.21. Rounded to
the nearest cent, the investor's cost, excluding commissions, is correct answers $1,026.56.

An individual purchases a $10,000 CD with a 5-year maturity from her local bank branch. In
doing so, she is eliminating correct answers interest rate risk.

An investor is trying to decide whether to purchase $10,000 face amount of a U.S. Treasury bond
or a highly rated corporate bond. The price of the Treasury bond is 102.20 while the price of the
corporate bond is 99 3/8. If the investor decides to purchase the Treasuries, disregarding
commissions, the price difference is correct answers $325.00.

Which of the following regarding corporate debentures are true?
I. They are certificates of indebtedness.
II. They give the bondholder ownership in the corporation.
III. They are unsecured bonds issued to finance capital expenditures or to raise working capital.
IV. They are the most senior security a corporation can issue. correct answers I and III

In the event of a company's insolvency, which of the following has first claim on assets? correct
answers Bondholders

Treasury bills are correct answers issued in book-entry form.

, Your client in the 35% federal income tax bracket currently owns some corporate bonds with a
coupon yield of 7%. In order to receive the same income after taxes, he would need to buy
municipal bonds with a coupon of correct answers 4.55%.

For a bond selling at a discount, the yield to maturity will be correct answers higher than the
nominal yield.

GHI common stock has a $10 par value and is selling in the market for $60 per share. If the
current quarterly dividend is $1, the current yield is correct answers 6.7%.

The DERP Corporation has an outstanding convertible bond issue that is convertible into eight
shares of stock. If the current market price of the bond is 80, the parity price of the stock is
correct answers $100 per share.

Issuing callable bonds is advantageous to the issuer because it allows the company to correct
answers replace a high, fixed-rate issue with a lower issue after the call date.

Regardless of the nature of the issuer, one thing an investor in debt securities can expect is
correct answers a stated maturity date.

A bond selling for $20 above par would be quoted correct answers 102.

If a convertible bond is purchased at its $1,000 par value and is convertible at $83.33 per
common share, what is the conversion ratio of common shares per bond? correct answers 12
shares for each bond

Which of the following statements regarding credit risk is not true? correct answers An A-rated
mortgage bond has less credit risk than a AA rated debenture.

A customer purchased new issue bonds at par two years ago. Since then, the cost of living as
measured by the consumer price index (CPI) has declined by almost half and the current yield on
the bonds has also declined. Which of the following best describes the value of the bonds
purchased? correct answers Their market price has increased.

The bond document that states the issuer's obligation to pay the investor a specific rate of interest
for the use of the funds as well as any collateral pledged as security for the loan and all other
pertinent details might be referred to by all of these terms except correct answers the debenture.

Which of the following is true of Ginnie Maes but not of other agency mortgage-backed
securities? correct answers Backed by the full faith and credit of the U.S. government

When an investor divides the coupon rate of a municipal bond by the complement of her tax rate,
she is computing the bond's correct answers tax-equivalent yield.

One year ago, ABC Widgets, Inc., funded an expansion to its manufacturing facilities by issuing
a 20-year first mortgage bond. The bond is secured by the new building and land. The bond was

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