Chapter 07
Interest Rates and Bond Valuation
Multiple Choice Questions
1.
Mary just purchased a bond which pays $60 a year in interest. What is this
$60 called?
2.
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?
3.
A bond’s coupon rate is equal to the annual interest divided by which one of
the following?
4.
The specified date on which the principal amount of a bond is payable is
referred to as which one of the following?
5.
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?
6.
The current yield is defined as the annual interest on a bond divided by
which one of the following?
7.
An indenture is:
8.
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:
9.
A bond that is payable to whomever has physical possession of the bond is
said to be in:
10.
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?
11.
Which of the following defines a note?
I. secured
II. unsecured
III. maturity less than 10 years
IV. maturity in excess of 10 years
12.
A sinking fund is managed by a trustee for which one of the following
purposes?
13.
A bond that can be paid off early at the issuer’s discretion is referred to as
being which one of the following?
14.
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?
15.
A deferred call provision is which one of the following?
16.
A call-protected bond is a bond that:
17.
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:
18.
A bond that has only one payment, which occurs at maturity, defines which
one of the following?
19.
Which one of the following is the price a dealer will pay to purchase a
bond?
20.
You want to buy a bond from a dealer. Which one of the following prices will
you pay?
21.
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:
22.
A bond is quoted at a price of $989. This price is referred to as which one of
the following?