Question 1

Cynthia Smith is evaluating a bond investment in ABC company.She is concerned about the corporation's ability to make future interest payments.Determine the company's times interest earned ratio if the company has operating income before interest and taxes of $12,235 million and interest expense of $1,025 million in 2017 and interpret it.

Accepted Answer

Times interest earned = $12,235 / $1,025...

Question 2

Which website has a brochure entitled,"Saving and Investing: A Roadmap to Your Financial Security Through Saving and Investing?"

Accepted Answer

A)  Apple
B)  Google
C)  Bing
D)  Securities and Exchange Commission
E)  Internal Revenue ServiceF) B) and C)
G) A) and C)

Question 3

Which one of the following represents a bond that generally lacks characteristics of a safe investment and is subject to high credit risk?

Accepted Answer

A)  Treasury bond
B)  Bond rated B by Standard and Poor's
C)  Bond rated AAA by Standard and Poor's
D)  Insured municipal bond
E)  Treasury billF) All of the above
G) A) and D)

Question 4

Dave Harris purchased a single bond last year for $987.He knows he will receive $1,000 on March 1,2026.This date is referred to as the ________ date.

Accepted Answer

A)  maturity
B)  purchase
C)  record
D)  ex-dividend
E)  declarationF) B) and E)
G) D) and E)

Question 5

When a Treasury bill matures,the investor receives:

Accepted Answer

A)  a premium.
B)  the interest only.
C)  the purchase price.
D)  the face value.
E)  a discount.F) B) and D)
G) B) and C)

Question 6

The current yield on a corporate bond takes into account:

Accepted Answer

A)  the bond's face amount.
B)  the interest rate paid by the bond.
C)  dollar amount of interest.
D)  current market value of the bond.
E)  All of theseF) A) and E)
G) C) and D)

Question 7

Which of the following can be purchased through Treasury Direct at www.treasurydirect.gov?

Accepted Answer

A)  TIPS
B)  Treasury bills
C)  Treasury notes
D)  Treasury bonds
E)  All of theseF) C) and E)
G) C) and D)

Question 8

Bonds are generally considered a relatively safe investment.How is it possible to lose money on bonds?

Accepted Answer

An investor can actually lose money by s...

Question 9

Tom McCallister buys a bond that the company can retire before maturity if they wish.What type of bond has Tom purchased?

Accepted Answer

A)  Debenture bond
B)  Subordinated debenture bond
C)  Convertible bond
D)  Callable bond
E)  High-yield bondF) A) and E)
G) B) and D)

Question 10

You are trying to evaluate two bond issues.One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback,would you purchase the "A" bond or the "B" bond?

Accepted Answer

To determine the quality and risk associ...

Question 11

Serial bonds are bonds of a single issue that:

Accepted Answer

A)  will pay no interest payments.
B)  will mature on the same date.
C)  will mature on different dates.
D)  cannot be called.
E)  will all mature ten years from the date of issue.F) B) and C)
G) B) and E)

Question 12

A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Accepted Answer

A)  $10
B)  $15
C)  $20
D)  $25
E)  $40F) A) and B)
G) C) and D)

Question 13

Professional management spells safety,because an occasional loss incurred with one bond issue is usually offset by gains from other bond issues in the fund's portfolio.

Accepted Answer

A) True 
 B)False

Question 14

Which bond rating does Standard & Poor's assign to a bond that is in default?

Accepted Answer

A)  A
B)  B
C)  C
D)  D
E)  ZF) C) and E)
G) B) and C)

Question 15

If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $1,375,then what is the semiannual interest on the bond?

Accepted Answer

A)  $55
B)  $80
C)  $100
D)  $110
E)  $137F) A) and E)
G) C) and D)

Question 16

If a bond is purchased at a price below the face value,the yield to maturity will be:

Accepted Answer

A)  greater than the stated interest rate.
B)  the same as the stated interest rate.
C)  less than the stated interest rate.
D)  zero.
E)  of no significance.F) A) and D)
G) B) and C)

Question 17

The Treasury Department currently sells T-bills with ________ maturities.

Accepted Answer

A)  4-week
B)  13-week
C)  26-week
D)  52-week
E)  All of theseF) C) and D)
G) B) and C)

Question 18

What is the approximate market value of a $1,000 corporate bond that pays 6 percent interest when comparable bonds are paying 8 percent interest?

Accepted Answer

A)  $60
B)  $80
C)  $750
D)  $1,000
E)  $1,060F) C) and E)
G) B) and C)

Question 19

Because bonds are considered debt financing that must be repaid at maturity,a corporation's financial difficulties have little effect on the bond's value between the issue date and the maturity date.

Accepted Answer

A) True 
 B)False

Question 20

To calculate the taxable equivalent yield on a municipal bond:

Accepted Answer

A)  divide your tax rate by the result of 1.0 minus your tax-exempt rate
B)  multiply your tax rate by your tax-exempt rate of return
C)  divide your tax rate by your tax-exempt rate of return
D)  divide the tax-exempt rate of return by your tax rate
E)  divide the tax-exempt rate of return by the result of 1.0 minus your tax rateF) C) and E)
G) A) and E)

Exam 15: Investing in Bonds

When a Treasury bill matures,the investor receives:

Correct Answer
verified

Tom McCallister buys a bond that the company can retire before maturity if they wish.What type of bond has Tom purchased?

Correct Answer
verified

Serial bonds are bonds of a single issue that:

Correct Answer
verified

Dave Harris purchased a single bond last year for $987.He knows he will receive $1,000 on March 1,2026.This date is referred to as the ________ date.

Correct Answer
verified

Professional management spells safety,because an occasional loss incurred with one bond issue is usually offset by gains from other bond issues in the fund's portfolio.

Correct Answer
verified

The Treasury Department currently sells T-bills with ________ maturities.

Correct Answer
verified

Which website has a brochure entitled,"Saving and Investing: A Roadmap to Your Financial Security Through Saving and Investing?"

Correct Answer
verified

Which one of the following represents a bond that generally lacks characteristics of a safe investment and is subject to high credit risk?

Correct Answer
verified

To calculate the taxable equivalent yield on a municipal bond:

Correct Answer
verified

A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Correct Answer
verified

What is the approximate market value of a $1,000 corporate bond that pays 6 percent interest when comparable bonds are paying 8 percent interest?

Correct Answer
verified

Because bonds are considered debt financing that must be repaid at maturity,a corporation's financial difficulties have little effect on the bond's value between the issue date and the maturity date.

Correct Answer
verified

If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $1,375,then what is the semiannual interest on the bond?

Correct Answer
verified

Which bond rating does Standard & Poor's assign to a bond that is in default?

Correct Answer
verified

The current yield on a corporate bond takes into account:

Correct Answer
verified

Correct Answer
verified
Times interest earned = $12,235 / $1,025...
View Answer

Bonds are generally considered a relatively safe investment.How is it possible to lose money on bonds?

Correct Answer
verified
An investor can actually lose money by s...
View Answer

You are trying to evaluate two bond issues.One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback,would you purchase the "A" bond or the "B" bond?

Correct Answer
verified
To determine the quality and risk associ...
View Answer

Which of the following can be purchased through Treasury Direct at www.treasurydirect.gov?

Correct Answer
verified

If a bond is purchased at a price below the face value,the yield to maturity will be:

Correct Answer
verified

Exam 15: Investing in Bonds

When a Treasury bill matures,the investor receives:

Correct AnswerverifiedShow Answer

Tom McCallister buys a bond that the company can retire before maturity if they wish.What type of bond has Tom purchased?

Correct AnswerverifiedShow Answer

Serial bonds are bonds of a single issue that:

Correct AnswerverifiedShow Answer

Dave Harris purchased a single bond last year for $987.He knows he will receive $1,000 on March 1,2026.This date is referred to as the ________ date.

Correct AnswerverifiedShow Answer

Professional management spells safety,because an occasional loss incurred with one bond issue is usually offset by gains from other bond issues in the fund's portfolio.

Correct AnswerverifiedShow Answer

The Treasury Department currently sells T-bills with ________ maturities.

Correct AnswerverifiedShow Answer

Which website has a brochure entitled,"Saving and Investing: A Roadmap to Your Financial Security Through Saving and Investing?"

Correct AnswerverifiedShow Answer

Which one of the following represents a bond that generally lacks characteristics of a safe investment and is subject to high credit risk?

Correct AnswerverifiedShow Answer

To calculate the taxable equivalent yield on a municipal bond:

Correct AnswerverifiedShow Answer

A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Correct AnswerverifiedShow Answer

What is the approximate market value of a $1,000 corporate bond that pays 6 percent interest when comparable bonds are paying 8 percent interest?

Correct AnswerverifiedShow Answer

Because bonds are considered debt financing that must be repaid at maturity,a corporation's financial difficulties have little effect on the bond's value between the issue date and the maturity date.

Correct AnswerverifiedShow Answer

If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $1,375,then what is the semiannual interest on the bond?

Correct AnswerverifiedShow Answer

Which bond rating does Standard & Poor's assign to a bond that is in default?

Correct AnswerverifiedShow Answer

The current yield on a corporate bond takes into account:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedTimes interest earned = $12,235 / $1,025...View AnswerShow Answer

Bonds are generally considered a relatively safe investment.How is it possible to lose money on bonds?

Correct AnswerverifiedAn investor can actually lose money by s...View AnswerShow Answer

You are trying to evaluate two bond issues.One bond issue is rated "A" by Moody's; the other is rated "B." How important are the bond ratings issued by Moody's Investors Service? Based on your feedback,would you purchase the "A" bond or the "B" bond?

Correct AnswerverifiedTo determine the quality and risk associ...View AnswerShow Answer

Which of the following can be purchased through Treasury Direct at www.treasurydirect.gov?

Correct AnswerverifiedShow Answer

If a bond is purchased at a price below the face value,the yield to maturity will be:

Correct AnswerverifiedShow Answer

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Correct Answer
verified
Times interest earned = $12,235 / $1,025...
View Answer

Correct Answer
verified
An investor can actually lose money by s...
View Answer

Correct Answer
verified
To determine the quality and risk associ...
View Answer

Correct Answer
verified

Correct Answer
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