Bond Markets

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Question 1

Free

Multiple Choice

____ require the owner to clip coupons attached to the bonds and send them to the issuer to receive coupon payments.

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Bearer

Registered

Treasury

Corporate

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Question 2

Free

True/False

The yield to maturity is the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering.

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True

False

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Question 3

Free

Multiple Choice

Note maturities are usually , while bond maturities are .

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less than 10 years; 10 years or more

10 years or more; less than 10 years

less than 5 years; 5 years or more

5 years or more; less than 5 years

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Question 4

Free

Multiple Choice

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury.

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annual

semiannual

quarterly

monthly

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Question 5

Free

Multiple Choice

The Treasury has relied heavily on ____ -year bonds to finance the U.S. budget deficit.

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Question 6

Multiple Choice

Interest earned from Treasury bonds is

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exempt from all income tax.

exempt from federal income tax.

exempt from state and local taxes.

subject to all income taxes.

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Question 7

True/False

Treasury bond auctions are normally conducted only at the beginning of each year.

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True

False

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Question 8

Multiple Choice

____ bids for Treasury bonds specify a price that the bidder is willing to pay and a dollar amount of securities to be purchased.

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Competitive

Noncompetitive

Negotiable

Non-negotiable

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Question 9

Multiple Choice

Treasury bond dealers

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quote an ask price for customers who want to sell existing Treasury bonds to the dealers.

profit from a very wide spread between bid and ask prices in the Treasury securities market.

may trade Treasury bonds among themselves.

make a primary market for Treasury bonds.

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Question 10

Multiple Choice

A ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based onthis information, the coupon payment after six months will be $ ____ .

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250

255

500

510

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Question 11

Multiple Choice

Bonds issued by ____ are backed by the federal government.

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the Treasury

AAA-rated corporations

state governments

city governments

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Question 12

Multiple Choice

Municipal general obligation bonds are . Municipal revenue bonds are .

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supported by the municipal government's ability to tax; supported by the municipal government's ability to tax

supported by the municipal government's ability to tax; supported by revenue generated from the project

always subject to federal taxes; always exempt from state and local taxes

typically zero-coupon bonds; typically zero-coupon bonds

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Question 13

Multiple Choice

In general, variable-rate municipal bonds are desirable to investors who expect that interest rates will ____ .

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remain unchanged

fall

rise

none of the above

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Question 14

Multiple Choice

A variable-rate bond allows

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investors to benefit from declining rates over time.

issuers to benefit from rising market interest rates over time.

investors to benefit from rising market interest rates over time.

none of the above.

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Question 15

Multiple Choice

Corporate bonds that receive a rating from credit rating agencies are normally placed at yields.

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higher; lower

lower; lower

higher; higher

none of the above

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Question 16

Multiple Choice

Which of the following institutions is most likely to purchase a private bond placement?

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commercial bank

finance company

insurance company

savings institution

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Question 17

Multiple Choice

A call provision on bonds normally

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allows the firm to sell new bonds at par value.

gives the firm to sell new bonds above market value.

allows the firm to sell bonds to the Treasury.

allows the firm to buy back bonds that it previously issued.

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Question 18

Multiple Choice

Assume U.S. interest rates are significantly higher than German rates. A U.S. firm with a German subsidiary could achieve a lower financing rate without exchange rate risk by denominating thebonds in

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dollars.

euros and making payments from U.S. headquarters.

euros and making payments from its German subsidiary.

dollars and making payments from its German subsidiary.

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Question 19

Multiple Choice

Bonds that are not secured by specific property are called

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a chattel mortgage.

open-end mortgage bonds.

debentures.

blanket mortgage bonds.

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Question 20

Multiple Choice

The coupon rate of most variable-rate bonds is tied to

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the prime rate.

the discount rate.

LIBOR.

the federal funds rate.

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Bond Markets

____ require the owner to clip coupons attached to the bonds and send them to the issuer to receive coupon payments.

The yield to maturity is the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering.

Note maturities are usually ____ , while bond maturities are ____ .

Investors in Treasury notes and bonds receive ____ interest payments from the Treasury.

The Treasury has relied heavily on ____ -year bonds to finance the U.S. budget deficit.

Interest earned from Treasury bonds is

Treasury bond auctions are normally conducted only at the beginning of each year.

____ bids for Treasury bonds specify a price that the bidder is willing to pay and a dollar amount of securities to be purchased.

Treasury bond dealers

A ten-year, inflation-indexed bond has a par value of $10,000 and a coupon rate of 5 percent. During the first six months since the bond was issued, the inflation rate was 2 percent. Based onthis information, the coupon payment after six months will be $ ____ .

Bonds issued by ____ are backed by the federal government.

Municipal general obligation bonds are ____ . Municipal revenue bonds are ____ .

In general, variable-rate municipal bonds are desirable to investors who expect that interest rates will ____ .

A variable-rate bond allows

Corporate bonds that receive a ____ rating from credit rating agencies are normally placed at ____ yields.

Which of the following institutions is most likely to purchase a private bond placement?

A call provision on bonds normally

Assume U.S. interest rates are significantly higher than German rates. A U.S. firm with a German subsidiary could achieve a lower financing rate without exchange rate risk by denominating thebonds in

Bonds that are not secured by specific property are called

The coupon rate of most variable-rate bonds is tied to

Note maturities are usually , while bond maturities are .

Municipal general obligation bonds are . Municipal revenue bonds are .

Corporate bonds that receive a rating from credit rating agencies are normally placed at yields.