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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A

Bearer

B

Registered

C

Treasury

D

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 ____ .

Choose correct answer/s
A

less than 10 years; 10 years or more

B

10 years or more; less than 10 years

C

less than 5 years; 5 years or more

D

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.

Choose correct answer/s
A

annual

B

semiannual

C

quarterly

D

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.

Choose correct answer/s
A

50

B

70

C

10

D

5

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Question 6
Multiple Choice

Interest earned from Treasury bonds is

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A
exempt from all income tax.
B
exempt from federal income tax.
C
exempt from state and local taxes.
D
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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A
Competitive
B
Noncompetitive
C
Negotiable
D
Non-negotiable
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Question 9
Multiple Choice

Treasury bond dealers

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A
quote an ask price for customers who want to sell existing Treasury bonds to the dealers.
B
profit from a very wide spread between bid and ask prices in the Treasury securities market.
C
may trade Treasury bonds among themselves.
D
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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A
250
B
255
C
500
D
510
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Question 11
Multiple Choice

Bonds issued by ____ are backed by the federal government.

Choose correct answer/s
A
the Treasury
B
AAA-rated corporations
C
state governments
D
city governments
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Question 12
Multiple Choice

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

Choose correct answer/s
A
supported by the municipal government's ability to tax; supported by the municipal government's ability to tax
B
supported by the municipal government's ability to tax; supported by revenue generated from the project
C
always subject to federal taxes; always exempt from state and local taxes
D
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 ____ .

Choose correct answer/s
A
remain unchanged
B
fall
C
rise
D
none of the above
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Question 14
Multiple Choice

A variable-rate bond allows

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A
investors to benefit from declining rates over time.
B
issuers to benefit from rising market interest rates over time.
C
investors to benefit from rising market interest rates over time.
D
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.

Choose correct answer/s
A
higher; lower
B
lower; lower
C
higher; higher
D
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?

Choose correct answer/s
A
commercial bank
B
finance company
C
insurance company
D
savings institution
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Question 17
Multiple Choice

A call provision on bonds normally

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A
allows the firm to sell new bonds at par value.
B
gives the firm to sell new bonds above market value.
C
allows the firm to sell bonds to the Treasury.
D
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

Choose correct answer/s
A
dollars.
B
euros and making payments from U.S. headquarters.
C
euros and making payments from its German subsidiary.
D
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

Choose correct answer/s
A
a chattel mortgage.
B
open-end mortgage bonds.
C
debentures.
D
blanket mortgage bonds.
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Question 20
Multiple Choice

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

Choose correct answer/s
A
the prime rate.
B
the discount rate.
C
LIBOR.
D
the federal funds rate.
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