FIN 3403 EXAM 2 TEST BANK
QUESTIONS WITH 100% CORRECT
ANSWERS { GRADED A+}
Mary just purchased a bond which pays $60 a year in interest. What is this $60
called? - ✔✔coupon
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? - ✔✔face value
A bonds coupon rate is equal to the annual interest divided by which one of the
following? - ✔✔face value
The specified date on which the principal amount of a bond is payable is referred
to as which one of the following? - ✔✔maturity
,Currently, the bond market requires a return of 11.6 percent on the 10-year bonds
issued by Winston Industries. The 11.6 percent is referred to as which one of the
following? - ✔✔yield to maturity
The current yield is defined as the annual interest on a bond divided by which one
of the following? - ✔✔Market price
An indenture is: - ✔✔the legal agreement between the bond issuer and the
bondholders
Atlas Entertainment has 15-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: - ✔✔in registered form
A bond that is payable to whomever has physical possession of the bond is said to
be in: - ✔✔bearer form
The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par.
These bonds fit the definition of which one of the following terms? -
✔✔debenture
Which of the following defines a note?
,I. secured
II. unsecured
III. maturity less than 10 years
IV. maturity in excess of 10 years - ✔✔II and III only
A sinking fund is managed by a trustee for which one of the following purposes? -
✔✔early bond redemption
A bond that can be paid off early at the issuer's discretion is referred to as being
which one of the following? - ✔✔callable
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 which one of the
following? - ✔✔call premium
A deferred call provision is which one of the following? - ✔✔prohibition which
prevents bond issuers from redeeming callable bonds prior to a specified date
A call-protected bond is a bond that: - ✔✔cannot be called during a certain period
of time.
, The items included in an indenture that limit certain actions of the issuer in order to
protect bondholder's interests are referred to as the: - ✔✔protective covenants.
A bond that has only one payment, which occurs at maturity, defines which one of
the following? - ✔✔zero coupon
Which one of the following is the price a dealer will pay to purchase a bond? -
✔✔bid price
You want to buy a bond from a dealer. Which one of the following prices will you
pay? - ✔✔asked 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: - ✔✔spread.
A bond is quoted at a price of $989. This price is referred to as which one of the
following? - ✔✔clean price
Pete paid $1,032 as his total cost of purchasing a bond. This price is referred to as
the: - ✔✔dirty price.
Real rates are defined as nominal rates that have been adjusted for which of the
following? - ✔✔inflation
QUESTIONS WITH 100% CORRECT
ANSWERS { GRADED A+}
Mary just purchased a bond which pays $60 a year in interest. What is this $60
called? - ✔✔coupon
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? - ✔✔face value
A bonds coupon rate is equal to the annual interest divided by which one of the
following? - ✔✔face value
The specified date on which the principal amount of a bond is payable is referred
to as which one of the following? - ✔✔maturity
,Currently, the bond market requires a return of 11.6 percent on the 10-year bonds
issued by Winston Industries. The 11.6 percent is referred to as which one of the
following? - ✔✔yield to maturity
The current yield is defined as the annual interest on a bond divided by which one
of the following? - ✔✔Market price
An indenture is: - ✔✔the legal agreement between the bond issuer and the
bondholders
Atlas Entertainment has 15-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: - ✔✔in registered form
A bond that is payable to whomever has physical possession of the bond is said to
be in: - ✔✔bearer form
The Leeward Company just issued 15-year, 8 percent, unsecured bonds at par.
These bonds fit the definition of which one of the following terms? -
✔✔debenture
Which of the following defines a note?
,I. secured
II. unsecured
III. maturity less than 10 years
IV. maturity in excess of 10 years - ✔✔II and III only
A sinking fund is managed by a trustee for which one of the following purposes? -
✔✔early bond redemption
A bond that can be paid off early at the issuer's discretion is referred to as being
which one of the following? - ✔✔callable
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 which one of the
following? - ✔✔call premium
A deferred call provision is which one of the following? - ✔✔prohibition which
prevents bond issuers from redeeming callable bonds prior to a specified date
A call-protected bond is a bond that: - ✔✔cannot be called during a certain period
of time.
, The items included in an indenture that limit certain actions of the issuer in order to
protect bondholder's interests are referred to as the: - ✔✔protective covenants.
A bond that has only one payment, which occurs at maturity, defines which one of
the following? - ✔✔zero coupon
Which one of the following is the price a dealer will pay to purchase a bond? -
✔✔bid price
You want to buy a bond from a dealer. Which one of the following prices will you
pay? - ✔✔asked 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: - ✔✔spread.
A bond is quoted at a price of $989. This price is referred to as which one of the
following? - ✔✔clean price
Pete paid $1,032 as his total cost of purchasing a bond. This price is referred to as
the: - ✔✔dirty price.
Real rates are defined as nominal rates that have been adjusted for which of the
following? - ✔✔inflation
