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1. The invoice price of a bond is the ______.
2. Sinking funds are commonly viewed as protecting the _______ of the bond.
3. A collateral trust bond is _______.
4. A mortgage bond is _______.
5. A debenture is _________.
6. If you are holding a premium bond, you must expect a _______ each year until maturity. If
you are holding a discount bond, you must expect a _______ each year until maturity. (In each case
assume that the yield to maturity remains stable over time.)
7. Floating-rate bonds have a __________ that is adjusted with current market interest rates.
8. Inflation-indexed Treasury securities are commonly called ____.
9. In regard to bonds, convexity relates to the _______.
10. A Japanese firm issued and sold a pound-denominated bond in the United Kingdom. A
U.S. firm issued bonds denominated in dollars but sold the bonds in Japan. Which one of the
following statements is correct?
11. The primary difference between Treasury notes and bonds is ________.
12. TIPS offer investors inflation protection by ______________ by the inflation rate each year.
13. You would typically find all but which one of the following in a bond contract?
14. To earn a high rating from the bond rating agencies, a company would want to have:
I. A low times-interest-earned ratio
II. A low debt-to-equity ratio
III. A high quick ratio
15. According to the liquidity preference theory of the term structure of interest rates, an
increase in the yield on long-term corporate bonds versus short-term bonds could be due to
_______.
16. __________ are examples of synthetically created zero-coupon bonds.
17. A __________ bond gives the bondholder the right to cash in the bond before maturity at a
specific price after a specific date.
18. TIPS are an example of _______________.
19. Bonds issued in the currency of the issuer's country but sold in other national markets are
called _____________.
20. You buy a TIPS at issue at par for $1,000. The bond has a 3% coupon. Inflation turns out
to be 2%, 3%, and 4% over the next 3 years. The total annual coupon income you will receive in
year 3 is _________.
21. The bonds of Elbow Grease Dishwashing Company have received a rating of C by
Moody's. The C rating indicates that the bonds are _________.
22. Bonds rated _____ or better by Standard & Poor's are considered investment grade.
23. Consider the liquidity preference theory of the term structure of interest rates. On
average, one would expect investors to require _________.
24. Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000.
Each pays interest of $120 annually. Bond A will mature in 5 years, while bond B will mature in 6
years. If the yields to maturity on the two bonds change from 12% to 14%, _________.
25. You hold a subordinated debenture in a firm. In the event of bankruptcy you will be paid
off before which one of the following?
26. Bonds with coupon rates that fall when the general level of interest rates rise are called
_____________.
27. _______ bonds represent a novel way of obtaining insurance from capital markets against
specified disasters.
28. The issuer of ________ bond may choose to pay interest either in cash or in additional
bonds.
29. Everything else equal, the __________ the maturity of a bond and the __________ the
coupon, the greater the sensitivity of the bond's price to interest rate changes.
30. Which one of the following statements is correct?
31. A __________ bond gives the issuer an option to retire the bond before maturity at a
specific price after a specific date.
32. Which of the following possible provisions of a bond indenture is designed to ease the
burden of principal repayment by spreading it out over several years?
33. Serial bonds are associated with _________.
34. In an era of particularly low interest rates, which of the following bonds is most likely to be
called?
35. Consider the expectations theory of the term structure of interest rates. If the yield curve
is downward-sloping, this indicates that investors expect short-term interest rates to __________
in the future.
36. A convertible bond has a par value of $1,000, but its current market price is $975. The
current price of the issuing company's stock is $26, and the conversion ratio is 34 shares. The
bond's market conversion value is _________.
37. A convertible bond has a par value of $1,000, but its current market price is $950. The
current price of the issuing company's stock is $19, and the conversion ratio is 40 shares. The
bond's conversion premium is _________.
38. A coupon bond that pays interest of 4% annually has a par value of $1,000, matures in 5
years, and is selling today at $785. The actual yield to maturity on this bond is _________.
39. A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5
years, and is selling today at an $84.52 discount from par value. The yield to maturity on this bond
is _________.
40. A coupon bond that pays interest of $60 annually has a par value of $1,000, matures in 5
years, and is selling today at a $75.25 discount from par value. The current yield on this bond is
_________.
41. A callable bond pays annual interest of $60, has a par value of $1,000, matures in 20 years
but is callable in 10 years at a price of $1,100, and has a value today of $1055.84. The yield to call
on this bond is _________.
42. A coupon bond that pays interest semiannually has a par value of $1,000, matures in 8
years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond
today will be __________.
